The profit maximizing output level for a firm will occur when Select one a. Fixe
ID: 1098008 • Letter: T
Question
The profit maximizing output level for a firm will occur when Select one a. Fixed Costs are minimized. 0 b. Marginal Revenue = Marginal Costs. o c. Total Revenues are maximized. o 4. Total costs are minimized. U e. Market share is maximized. If the price elasticity of demand equals 0.78 then demand is elastic. Select one: 0 True 0 False When prices increased by 20%. quantity demanded decreased by 28%. The price elasticity of demand is Select one: 0 a. -1.4 V b. Not enough information c. -0.08 is -0.71 If the price elasticity of demand is elastic, then raising prices will increase total revenue. Select one: True False Commodities X and Y are substitutes 4 the cross -price elasticity of demand is positive. Select one: True FalseExplanation / Answer
1) b. Marginal Revenue = Marginal Cost
The firm's profit will be maximized at the level of output whereby the marginal (additional) revenue received from the last unit produced is just equal to the marginal (additional) cost incurred by producing that last unit. Maximum profit for the firm occurs at the output level where MR = MC.
2) False
The value is less than 1 and hence it is inelastic
3) a. -1.4
Price elasticty of demand is the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price.
= -28%/20% = -1.4
4) False
The demand for a good is said to be elastic (or relatively elastic) when its PED is greater than one (in absolute value): that is, changes in price have a relatively large effect on the quantity of a good demanded
5) True
The demand for a good is said to be elastic (or relatively elastic) when its PED is greater than one (in absolute value): that is, changes in price have a relatively large effect on the quantity of a good demanded
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