Question

3) Suppose that a price searcher is currently charging a price that leads to an output level where marginal revenue is zero. Assume that marginal costs are always positive.

This price will or will not    maximize the firm’s profit.

4) If a firm goes out of business, what happens to the firm’s assets and workers?

A) The assets and workers become available for use by other firms in potentially more productive ways.

B) The assets and talents of the workers must remain with the firm owners

C) The assets and workers become available for use by other firms, but only for less productive purposes.

D) The assets and talents of the employees are lost permanently.

5) Suppose that families with low income have a highly elastic demand for college, while families with high income may have an inelastic demand for college. Assume there is no “reselling” of a college education.

Which of the following pricing strategies would increase revenue for colleges?

A) Charge students from low-income families a lower-price, and charge students from high-income families a higher price.

B) Charge students from high-income families a lower-price, and charge students from low-income families a higher price.

C) Charge all students the same price, regardless of family income.

Answer 1

3) Suppose that a price searcher is currently charging a price that leads to an output level where marginal revenue is zero. Assume that marginal costs are always positive.

Answer:- This price will not maximize the firm’s profit.

Reason:- Profit is maximized where MR=MC

4) If a firm goes out of business, what happens to the firm’s assets and workers?

A) The assets and workers become available for use by other firms in potentially more productive ways.

Reason:- When the human resources and assets of any organizations are not utilized by any organization as it goes out of the business, then these elements become available for the organizations which are still operating in the industry for better utilization.

5) Suppose that families with low income have a highly elastic demand for college, while families with high income may have an inelastic demand for college. Assume there is no “reselling” of a college education.

Which of the following pricing strategies would increase revenue for colleges?

A) Charge students from low-income families a lower-price, and charge students from high-income families a higher price.

Reason- By charging a higher fee from the high-income families, the firm can increase its revenue as these family have an inelastic demand thus when the price is raised, there will be no change in the demand of the college education. On the other hand, as the demand of the college education of low-income families is elastic in nature thus if the low fee is charged, more students from these families will be enrolled and thus the revenue will be increased.