Q: A firm's objective in managerial economics is typically to maximize profit. Which equation best represents this objective?

$$\text{Profit} = \text{Total Revenue} - \text{Total Cost}$$

Question 1

A firm's objective in managerial economics is typically to maximize profit. Which equation best represents this objective?

Accepted Answer

$$	ext{Profit} = 	ext{Total Revenue} - 	ext{Total Cost}$$

Question 2

Suppose a firm's total profit function is $$\Pi(Q) = 50 + 100Q - 5Q^2$. What is the marginal profit function?

Accepted Answer

$$\frac{d\Pi}{dQ} = 100 - 10Q$$

Question 3

If a firm’s marginal revenue (MR) is less than its marginal cost (MC) at a given output level, what should the firm do to maximize profit?

Accepted Answer

Decrease production

Question 4

Given the total cost function $$TC = 100 + Q^2$ and total revenue function TR = 120Q$$ - $$2Q^2$$, at what output level $$Q^*$$ does the firm maximize profit?

Accepted Answer

$$Q^* = 20$$

Question 5

Which of the following best describes the use of marginal analysis in managerial decision-making?

Accepted Answer

Comparing the additional benefit and additional cost of producing one more unit

Question 6

A firm’s total profit function is $$\Pi(Q) = 30Q + 20Q^2$ - Q^3$. What is the output level that maximizes marginal profit?

Accepted Answer

$$Q = 6.67$$

Question 7

Which rule should be used to differentiate the function $$y = (2x^2$ + 3x)(x^3$)$$?

Accepted Answer

Product rule

Question 8

If a firm’s total cost function is $$TC = aQ^2$ + 10Q + 50$$ and the market price is $$P = 90$$, what is the value of $$a if $$the profit-maximizing output is $$Q^* = 5$$?

Accepted Answer

$$a = 8$$

Question 9

Which of the following is NOT a key principle of the theory of a firm?

Accepted Answer

Maximizing government revenue

Question 10

Given the function $$Y = 2 + 10X$$, what is the marginal value of $$Y$$ with respect to $$X$$?

Accepted Answer

$$10$$

Question 11

Which optimization technique involves setting the derivative of the objective function equal to zero?

Accepted Answer

Using calculus

Question 12

If a firm’s total revenue function is $$TR = PQ$$ and $$Q = f(L)$$, which rule is used to find the marginal revenue product of labor?

Accepted Answer

Chain rule

Question 13

What is the slope of the budget line for a consumer with budget constraint $$M = P_x x + P_y y$$?

Accepted Answer

$$-\frac{P_x}{P_y}$$

Question 14

Which function type is $$y = 10 + 2x - 25x^2$?

Accepted Answer

Polynomial function

Question 15

If $$y = x^n$$, what is the derivative of $$y$$ with respect to $$x$$ using the power rule?

Accepted Answer

$$\frac{dy}{dx} = n x$$^{n-1}$$

Question 16

A firm’s total cost function is $$TC = Q^2$ + 5Q + 100. If $$the product sells for $$P = 15$$, what is the profit-maximizing output level $$Q^*$$?

Accepted Answer

$$Q^* = 5$$

Question 17

Which of the following is a correct application of the product rule for differentiation?

Accepted Answer

$$\frac{d}{dx}[AB] = A \frac{dB}{dx} + B \frac{dA}{dx}$$

Question 18

If the marginal profit is zero at a certain output level, what does this indicate?

Accepted Answer

Profit is maximized at that output level

Question 19

Which of the following is true about the relationship among total, average, and marginal values?

Accepted Answer

When marginal equals average, the average is at its maximum or minimum

Question 20

Which real-world example best illustrates a firm using marginal analysis to make production decisions?

Accepted Answer

Nvidia increasing H100 GPU output to meet AI demand

Theory of the Firm and Decision-Making Tools: Foundations for Managerial Economics

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