What rule(s) should a firm follow in deciding optimum output for profit maximization?
The firm should expand its output as long as the added output contributes more to total revenue than it does to total cost, which means the spread between total revenue and total cost (that difference is profit) is increasing. The additions to TR and TC per unit of output are MR and MC, respectively. Output should optimally be set where MR and MC are equal; this occurs where TR ? TC = PROFIT is at a maximum.
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Individuals will increase their saving as
A) the interest rate falls. B) the interest rate increases. C) the rate of unemployment increases. D) business investment falls.
Suppose Veronica sells teapots in the perfectly competitive teapot market. Her output per day and her costs are as follows:
Output per Day Total Cost 0 $20 1 32 2 37 3 48 4 61 5 75 6 92 7 113 8 136 Suppose the current equilibrium price in the teapot market is $10. To maximize profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss) will she make? Draw a graph to illustrate your answer. Your graph should include Veronica's demand, ATC, AVC, MC, and MR curves, the price she is charging, the quantity she is producing, and the area representing her profit (or loss).
Explain what happens to the short-run aggregate supply curve when output exceeds its potential
What will be an ideal response?
In the above figure, a shortage could be caused by a government price ceiling set at
A) $1.00. B) $2.00. C) $2.50. D) $3.00.