Question

Profits will always be maximized when total revenue equals total cost =T or F

If marginal revenue for an extra unit is positive, then selling the extra unit causes total revenue to rise. T or F

Given a downward-sloping demand curve and positive marginal costs, profit-maximizing firms will always sell less output at higher prices than will revenue-maximizing firms. T or F

Marginal profit is the difference between marginal revenue and marginal cost, and will always equal zero at the profit-maximizing activity level T or F

Marginal cost must be falling (cannot be rising) in order for average total cost to decline as output expands. T or F

Answer 1

1) False. Profit is maximised when MR=MC but total revenue is maximised when marginal revenue=0

2)True. Total revenue is the sum of marginal revenue from all the quantity consumed.

3)True because profit is maximised when marginal revenue=marginal cost and when marginal cost is positive it means firm is selling less quantity at higher price compared to the level where marginal revenue=0

4)True. Marginal profit=marginal revenue-marginal cost and marginal profit=0 at profit maximising situation.

5)False. marginal cost can be increasing and still average total cost decreases if marginal cost is less than ATC.