Economics - Economics Section 1
21. In order to maximize profits a firm should operate at a quantity such that marginal revenue is:
- Option : C
- Explanation : In order to maximize profits the quanity produced must be such that marginal revenue is equal to marginal cost.
22. A monopolist faces the following demand and cost schedules:
| Output (units) | Price ($/unit) | Total Costs ($) |
| 0 | 5000 | 800 |
| 20 | 4800 | 20800 |
| 40 | 4600 | 64800 |
| 60 | 4400 | 122800 |
| 80 | 4200 | 244800 |
| 100 | 4000 | 350800 |
The optimal output level for this producer is closest to:
- Option : B
- Explanation : The optimal price level is 60 units because it produces the highest profit.
- Option : B
- Explanation : The profit maximizing choice is the level of output where marginal revenue equals marginal cost.
24. Which of the following statements is most accurate?
- Option : B
- Explanation : When companies have similar market shares, competitive forces tend to outweigh the benefits of collusion.
- Option : C
- Explanation : The economic profit will attract new entrants to the market and encourage existing companies to expand capacity.
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