How does a manufacturer set total output to maximize profit?

set at point where marginal revenue equals marginal cost

How might advertising lead to a shift in the demand curve?

by helping create fads and trends

Gerda owns a store. When decreasing prices force her to cut costs, one of the first things

decrease hours for some workers

What does it mean when you have demand for a good or service?

you are willing and able to buy the good

When would it make sense for a factory that is losing money to remain in operation

if total revenue > operating cost

What effect do rising input costs have on the price of a good?

the good becomes more expensive to produce

How does specialization affect production?

it makes workers more efficient

What is considered a negative of government regulation?

expensive for businesses to follow all rules

In what situation would a factory that is losing money keep operating?

if total revenue is greater than operating cost

If the marginal cost becomes higher than the price, what happens to a company?

company will lose money on each unit produced

How is the total cost of a factory or other production site determined?

fixed costs plus variable costs

How does new technology generally affect production?

lowers cost and increases supply

When the price of a product goes down, what happens?

some producers make less, others drop out of market

How does an increase in population affect the demand curve?

the entire curve shifts to the right

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Topic 3 FInal Exam Review

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Questions 24

Answers

1
How does a manufacturer set total output to maximize profit?
set at point where marginal revenue equals marginal cost
set point where marginal revenue is smallest
set production so that total revenue plus cost is greatest
set at point where marginal revenue and profit are the same
2
How might advertising lead to a shift in the demand curve?
by helping create fads and trends
by leading to a shift in demographics
by increasing popularity of inferior goods
by allowing the law of demand to operate freely
3
What effect does the availability of many substitutes have on the elasticity of demand?
demand is inelastic
demand is elastic
demand is not affected
demand is unitary elastic
4
Gerda owns a store. When decreasing prices force her to cut costs, one of the first things
decrease hours for some workers
cut her rent costs in half
stop paying her property taxes
stop selling perishable foods
5
The price of home computers rises. According to the law of supply, what will makers do?
stop making computers
make more computers
make the same number of computers
make fewer computers
6
For which of the following goods is supply likely to be inelastic in the short run
staples
newspapers
haircuts
cargo ships
7
What does it mean when you have demand for a good or service?
you are able to buy the good, but not at the given price
You can afford it, but may not be willing to buy it
you are willing and able to buy the good
you want the good but can't afford it
8
When would it make sense for a factory that is losing money to remain in operation
if marginal product of labor becomes negative
if total cost > operating cost
if total revenue > operating cost
if marginal revenue = marginal cost
9
Ultimately, the main factor that drives decisions about production is the
availability of natural resources
public need for better goods
desire to maximize profits
government regulations and rules
10
How is profit determined?
marginal revenue plus marginal cost
total revenue plus total cost
total revenue minus total cost
marginal revenue minus marginal cost
11
What effect do rising input costs have on the price of a good?
the good becomes cheaper to produce
it has no effect on the cost of the good
the good becomes more expensive to produce
the good becomes dependent on gov't regulation
12
How does specialization affect production?
it makes workers more efficient
it slows down production
it decreases revenue
it increases cost
13
What is considered a negative of government regulation?
allows businesses to sell unsafe products
expensive for businesses to follow all rules
does not protect the well-being of the public
protects consumers but harms the environment
14
What can cause an entire demand curve to shift?
a change in demographics
uncertainty about the future price
an increase in price
a decrease in price
15
In what situation would a factory that is losing money keep operating?
if total cost is greater than operating cost
if marginal product of labor becomes negative
if marginal revenue equals marginal cost
if total revenue is greater than operating cost
16
If prices rise and income stays the same, what is the effect on demand?
More is bought of some goods and less of others
more goods are bought
Fewer goods are bought
demand stays the same
17
If the marginal cost becomes higher than the price, what happens to a company?
diminishing marginal returns will shrink the production
company will lose money on each unit produced
company specialization will lower the actual price charged
the company will go out of business
18
When gov't intervention causes the supply of a good to rise, what happens to the supply curve?
it shifts to the right
it shifts to the left
the supply curve is not affected
it reverses direction
19
How is the total cost of a factory or other production site determined?
marginal costs plus variable costs
fixed costs plus variable costs
marginal cost plus fixed cost
marginal cost plus output cost
20
When is a market at equilibrium?
when suppliers begin to reduce prices
when prices equal cost of production
when unsold goods begin to pile up
When QD = QS
21
How does new technology generally affect production?
lowers cost and increases supply
has very little effect on production
increases cost and decreases supply
lowers cost and decreases supply
22
When the price of a product goes down, what happens?
some producers make less, others drop out of market
existing producers expand, new producers enter the market
existing firms continue their usual output but earn less
new firms enter the market as older ones drop out
23
If a bakery has a surplus at the end of each day, the owner should
sell only bread
lower the price of bread
stop selling bread
raise the price of bread
24
How does an increase in population affect the demand curve?
a point on the curve moves down
the entire curve shifts to the right
the entire curve shifts to the left
a point on the curve moves up

Topic 3 FInal Exam Review Flashcards | StudBud