ECON Chapter 8 Study Guide - Custom Scholars
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# ECON Chapter 8 Study Guide

question
Herbert Simon has concluded that decision making in industry is often best described as
satisficing
question
At a profit-maximizing output level
all of the above
question
The demand curve for a firm's product is also the curve showing
average revenue
question
A firm that is earning zero economic profit should go out of business.
FALSE
question
Marginal, average, and total figures are bound together. If any two are known, the third can be calculated.
TRUE
question
The average revenue curve can also be described as the demand curve.
TRUE
question
When marginal cost exceeds marginal revenue
marginal profit < 0
question
Average revenue is equal to
TR/Q
question
In 1984, British Prime Minister Margaret Thatcher decided to shut down so-called "uneconomic" coal mines owned by the government. The National Union of Mineworkers protested, asserting that there was enough coal in the mines to continue current levels of production for years. Thatcher implicitly argued that her decision was economically sound because, at any practical level of output, for each "uneconomic" mine
MC> MR
question
Company A manufactures a single automotive component. It had total revenue of \$100,000 and an economic profit of \$20,000. What is the price of the component it manufactures?
(\$100,000/quantity sold)
question
A firm that sells at a price below average cost is losing money.
TRUE
question
A firm can choose a quantity of output, and the price is then determined by
consumers demand
question
In the case study discussed in the chapter, the electronics firm was losing money by selling its calculators at a price that was below average cost.
FALSE
question
Price and output decisions are two aspects of the same choice.
TRUE
question
It can be shown that average revenue and price are always equal.
TRUE
question
The term "satisficing" for decision-making behavior by many firms was coined by
Herbert Simon
question
The typical total profit graphical presentation is shown as
a hill, or mound
question
In the case study discussed in the chapter, the electronics firm was actually enhancing its profits by selling calculators at a price that was below average cost.
TRUE
question
By definition, a firm that practices satisficing
makes acceptable decisions, though not necessarily optimal ones
question
Total profit is maximized where
all of the above
question
Economists and accountants use the same definition of profit.
FALSE
question
Net benefit is equal to total benefit minus marginal cost.
FALSE
question
If total profit is at a maximum, then average profit is zero.
FALSE
question
A firm's total profit is the difference between its sales and what it pays out in costs.
TRUE
question
Any change in a firm's fixed costs will change its profit-maximizing level of output.
FALSE
question
If a firm's marginal profit is negative, it should reduce its output level.
TRUE
question
A grocery store sells soup for \$1.50 a can, or \$2.50 for two cans. To a customer, the marginal cost of buying the second can of soup is
\$1
question
Firms can make decisions using marginal analysis even if they do not know the shape of a demand curve.
TRUE
question
Marginal analysis is useful in economics, but not in other areas of life.
FALSE
question
Joe and Ed go to a diner that sells hamburgers for \$5 and hot dogs for \$3. They agree to split the lunch bill evenly. Ed chooses a hot dog. The marginal cost to Joe then of ordering a hamburger instead of a hot dog is
\$2.50
question
Accounting profit is usually smaller than economic profit.
FALSE
question
Price and quantity decisions made by a company have vital influences on
all of the above are correct
question
If marginal cost is rising, then average cost must be rising.
FALSE
question
Total revenue
all of the above are correct
question
If the marginal profit of the next unit is negative, the firm should produce more output in order to generate greater profit.
FALSE
question
A small business owner who is earning a positive economic profit, no matter how small, is doing better than if she sold her business and went to work for another firm.
TRUE
question
Marginal cost curves and average cost curves are both purely upward sloping.
FALSE
question
Average cost is the cost of producing the next unit.
FALSE
1 of 38
question
Herbert Simon has concluded that decision making in industry is often best described as
satisficing
question
At a profit-maximizing output level
all of the above
question
The demand curve for a firm's product is also the curve showing
average revenue
question
A firm that is earning zero economic profit should go out of business.
FALSE
question
Marginal, average, and total figures are bound together. If any two are known, the third can be calculated.
TRUE
question
The average revenue curve can also be described as the demand curve.
TRUE
question
When marginal cost exceeds marginal revenue
marginal profit < 0
question
Average revenue is equal to
TR/Q
question
In 1984, British Prime Minister Margaret Thatcher decided to shut down so-called "uneconomic" coal mines owned by the government. The National Union of Mineworkers protested, asserting that there was enough coal in the mines to continue current levels of production for years. Thatcher implicitly argued that her decision was economically sound because, at any practical level of output, for each "uneconomic" mine
MC> MR
question
Company A manufactures a single automotive component. It had total revenue of \$100,000 and an economic profit of \$20,000. What is the price of the component it manufactures?
(\$100,000/quantity sold)
question
A firm that sells at a price below average cost is losing money.
TRUE
question
A firm can choose a quantity of output, and the price is then determined by
consumers demand
question
In the case study discussed in the chapter, the electronics firm was losing money by selling its calculators at a price that was below average cost.
FALSE
question
Price and output decisions are two aspects of the same choice.
TRUE
question
It can be shown that average revenue and price are always equal.
TRUE
question
The term "satisficing" for decision-making behavior by many firms was coined by
Herbert Simon
question
The typical total profit graphical presentation is shown as
a hill, or mound
question
In the case study discussed in the chapter, the electronics firm was actually enhancing its profits by selling calculators at a price that was below average cost.
TRUE
question
By definition, a firm that practices satisficing
makes acceptable decisions, though not necessarily optimal ones
question
Total profit is maximized where
all of the above
question
Economists and accountants use the same definition of profit.
FALSE
question
Net benefit is equal to total benefit minus marginal cost.
FALSE
question
If total profit is at a maximum, then average profit is zero.
FALSE
question
A firm's total profit is the difference between its sales and what it pays out in costs.
TRUE
question
Any change in a firm's fixed costs will change its profit-maximizing level of output.
FALSE
question
If a firm's marginal profit is negative, it should reduce its output level.
TRUE
question
A grocery store sells soup for \$1.50 a can, or \$2.50 for two cans. To a customer, the marginal cost of buying the second can of soup is
\$1
question
Firms can make decisions using marginal analysis even if they do not know the shape of a demand curve.
TRUE
question
Marginal analysis is useful in economics, but not in other areas of life.
FALSE
question
Joe and Ed go to a diner that sells hamburgers for \$5 and hot dogs for \$3. They agree to split the lunch bill evenly. Ed chooses a hot dog. The marginal cost to Joe then of ordering a hamburger instead of a hot dog is
\$2.50
question
Accounting profit is usually smaller than economic profit.
FALSE
question
Price and quantity decisions made by a company have vital influences on
all of the above are correct
question
If marginal cost is rising, then average cost must be rising.
FALSE
question
Total revenue
all of the above are correct
question
If the marginal profit of the next unit is negative, the firm should produce more output in order to generate greater profit.
FALSE
question
A small business owner who is earning a positive economic profit, no matter how small, is doing better than if she sold her business and went to work for another firm.
TRUE
question
Marginal cost curves and average cost curves are both purely upward sloping.
FALSE
question
Average cost is the cost of producing the next unit.
FALSE

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