Chapter --decision making.docVIP

Chapter 3 Student: ___________________________________________________________________________ 1.?A firm will maximize profit by producing that level of output at which?A.?The additional revenue from the last unit sold exceeds the additional cost of the last unit by the largest amount.B.?The additional revenue from the last unit sold equals the additional cost of the last unit.C.?Total revenue exceeds total cost by the largest amount.D.?Total revenue equals total cost.E.?Both b and c. ?2.?The function a decision maker seeks to maximize or minimize is the ________ function.?A.?Optimal.B.?Decision-making.C.?Objective.D.?Marginal.E.?None of the above. ? 3.?When marginal cost is greater than marginal benefit at the current activity level, the decision maker can increase net benefit by decreasing the activity because.?A.?Total benefit will rise by more than total cost will rise.B.?Marginal cost is rising faster than marginal benefit is falling.C.?Net benefit is upward sloping at this point.D.?Total cost will fall by more than total benefit will fall. ? ?The next 3 questions refer to the following figure, which shows marginal benefits (MB) and marginal cost (MC) of activity A.?? ? 4.?If the decision maker is choosing 200 units of activity A,?A.?This level maximizes net benefits.B.?The activity could be reduced by one unit and net benefits will increase by $10.C.?The activity could be increased by one unit and net benefits will increase by $10.D.?The activity could be increased by one unit and net benefits will increase by $25.E.?The activity could be reduced by one unit and net benefits will increase by $15. ? 5.?If the decision maker is choosing 400 units of activity A,?A.?This level maximizes net benefits.B.?The activity could be reduced by one unit and net benefits will increase by $10.C.?The activity could be reduced by one unit and net benefits will rise by $25.D.?The activity could be increased by one unit and net benefits will increase by $1