. Gertrude, a sandwich shop owner, has the following information: P = MR = $4; A

Question

. Gertrude, a sandwich shop owner, has the following information: P = MR = $4;
ATC = $2; AVC = $1; MC = $4; and Q = 500. From these data, Gertrude can determine:
a. Her profits are not being maximized
b. She has earned economic profits of $1000
c. She has earned economic profits of $1500
d. She should sell fewer sandwiches

32. Imagine you owned a machine that produced perfectly authentic and legal $20 bills.
You would operate this machine until
a. The bills became worthless
b. The total cost began to fall
c. The marginal revenue began to fall
d. The marginal cost of printing a bill was $20

33. John derives 40 units of satisfaction from a slice of pizza and 20 units of satisfaction
from a soft drink. The Pizza cost $2 and the Soft drink cost 50 cents. If the next units of each have these same relationships, (assuming John has no additional money.)
a. John should cut back on pizza and add a soft drink
b. John should cut back on soft drinks and add more pizza
c. John has maximized his total utility

34. One reason why a consumer’s demand curve for a product is downward sloping is
because:
a. Total utility falls below marginal utility as more of a product is consumed
b. Marginal utility diminishes as more of a product is consumed
c. Time becomes less valuable as more of a product is consumed
d. The income and the substitution effects precisely offset each other

35. When a firm incurs losses in the short run, the most important consideration in
determining whether to exit the business or continue producing is if
a. Average total cost is at its minimum
b. Average variable cost is at its minimum
c. Total revenue exceeds total cost
d. Revenues cover some of its fixed costs and all of its variable costs

36. Oligopolies must ________ to their strategies in order to determine their optimal strategy:
a. Anticipate the reaction of their customers
b. Anticipate the reaction of their rivals
c. Both A and B
d. None of the Above

Explanation / Answer

answers in order c. She has earned economic profits of $1500 32. d. The marginal cost of printing a bill was $20 33. a. John should cut back on pizza and add a soft drink 34. b. Marginal utility diminishes as more of a product is consumed 35. d. Revenues cover some of its fixed costs and all of its variable costs 36. c. Both A and B please rate

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