**Economic Decision-Making: Marginal Revenue vs. Marginal Cost**When analyzing a firm's production decisions, it's important to consider the relationship between Marginal Revenue (MR) and Marginal Cost (MC). Here's a breakdown of the options in a given scenario:1. **Scenario Analysis** - If a firm is producing where MR > MC, this indicates a potential area for adjustment in output.2. **Options Explained** - **a.** The revenue gained by producing one more unit of output is less than the cost incurred by doing so. - This is not accurate if MR > MC; revenue should exceed the cost. - **b.** The firm is already maximizing profits because revenue is being increased by more than costs. - This is incorrect with MR > MC; profit maximization requires MR = MC. - **c.** The revenue gained by producing one more unit of output exceeds the cost incurred by doing so. - This is correct if MR > MC; additional units are adding to profit. - **d.** The revenue gained by producing one more unit of output equals the cost incurred by doing so. - This is the condition for profit maximization, MR = MC, but not MR > MC.Understanding these dynamics helps firms optimize their production to achieve maximum profitability.

Marginal revenue is the revenue earned from producing one extra unit of output. Marginal cost is the…

If a firm is producing where MR > MC O a. the revenue gained by producing one more unit of output is less than the cost incurred by doing so. O b. the firm is already maximizing profits because revenue is being increased by more than costs. the revenuesgained by producing one more unit of output exceeds the cost incurred by doing so. O d. the revenue gained by producing one more unit of output equals the cost incurred by doing so.

If a firm is producing where MR > MC O a. the revenue gained by producing one more unit of output is less than the cost incurred by doing so. O b. the firm is already maximizing profits because revenue is being increased by more than costs. the revenuesgained by producing one more unit of output exceeds the cost incurred by doing so. O d. the revenue gained by producing one more unit of output equals the cost incurred by doing so.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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5,000 Total Cost 10,000 O a.) The profit is maximized. Profit Total Revenue b.) The firm should increase output 15,000 Based on this graph, which of the following statements is true at an output of 7,000 indicated by the green line? Output Oc.) The slopes of the total revenue and total cost curves are equal. O d.) The cost is rising faster than the revenue.
on the long run average cost curve can you mark where this would be on the curve?
Suppose we have a firm in a perfectly competitive market. Assume that we have the usual shaped cost curves. At a market price of $15 the profit maximizing firm produces 53 units. Something changes that causes the firm to produce a quantity of zero at a price of $15 in the short-run. Which of the changes below can explain the change in the firm's behavior? O An increase in the fixed cost and a decrease in the marginal cost. O An increase in the fixed cost. O An increase in the marginal cost. O A decrease in the market price.
hould a competitive firm ever produce when it is losing money? Why or why not? D A. No, the firm should shutdown if it is making an accounting loss. O B. No, the firm should shutdown if it is making an economic loss. O C. Yes, as long as revenue can cover total variable costs plus any portion of fixed costs. O D. Yes, as long as revenue can cover some portion of total variable costs.
Exhibit 21-9 Cost MC, ATC₂ MC1 ATC1 MC 3 PI ATC 3 Quantity of Output Refer to Exhibit 21-9. Let MC 1 and ATC 1 represent the initial cost curves of a peanut butter producer. In which of the following cases is it most likely that the firm's curves will shift leftward to MC 2 and ATC 2? O a. The market price of peanuts decreases. O b. The market price of peanuts increases. O c. The government lowers taxes paid by peanut butter producers. O d. The market price of peanuts remains constant.
If a graph is used to compare total revenue and total cost of a perfectly competitive firm, then the horizontal axis of the graph will represent the and the vertical axis will represent OA. price, measured in dollars; quantity of goods produced O B. total costs measured in dollars; quantity of goods produced O C. quantity produced; both total revenue and total costs, measured in dollars. O D. quantity produced; total revenue and total variable costs, measured in dollars.
QUESTION 4 The shape of a firm's long-run. O variable cost curve marginal revenue curve fixed cost curve O average cost curve depends on how costs vary with scale of operations.
QUESTION 2 A firm has two plants, which have Marginal Cost functions given by: MC(Q₁)=2Q1 and MC(Q2)=3Q2. If the firm produces 20 units of output, then: O a. Q1-10 and Q2=10. O b. Q1-14 and Q2-6- O c. Q1-8 and Q2=12- O d. Q1-12 and Q2=8.