AP Micro AP Micro Profit Maximization

Question 1

The profit-maximizing rule for all firms states that output should be set where:

Accepted Answer

Marginal revenue equals marginal cost

Answer

Total revenue equals total cost

Answer

Average revenue equals average cost

Answer

Price equals average variable cost

Question 2

Economic profit equals:

Accepted Answer

Total revenue minus total costs including implicit costs

Answer

Total revenue minus explicit costs only

Answer

Total revenue minus variable costs

Answer

Normal profit plus accounting profit

Question 3

A firm should shut down in the short run if:

Accepted Answer

Price falls below average variable cost

Answer

Price falls below average total cost

Answer

Total revenue is less than total fixed cost

Answer

Marginal cost exceeds average cost

Question 4

When a competitive firm's price equals its minimum average total cost in the long run, it earns:

Accepted Answer

Zero economic profit (normal profit)

Answer

Positive economic profit

Answer

Negative economic profit

Answer

Maximum accounting profit

Question 5

Marginal revenue for a perfectly competitive firm equals:

Accepted Answer

The market price

Answer

Price divided by quantity

Answer

The slope of the total cost curve

Answer

Marginal cost

Question 6

A firm earns positive economic profit when:

Accepted Answer

Price exceeds average total cost

Answer

Total revenue exceeds total variable costs

Answer

Marginal revenue exceeds marginal cost

Answer

Total revenue equals total fixed costs