If a Company is generating EPS or revenue growth, does that necessarily imply there is positive economic profit created by the firm's management? Explain and give at least one specific factor for each variable that supports your answer.

If the total revenue function for a computer is

R(x) = 1200x − 32x² − x³,

find the level of sales, x, that maximizes revenue and find the maximum revenue in dollars.

B.) The profit per acre from a grove of orange trees is given by

x(270 − x) dollars,

where x is the number of orange trees per acre. How many trees per acre will maximize the profit?
trees per acre

A company calculates the following for an item that they produce and sell. The revenue, R(x), from the sale of 90 items is 2300 dollars. The marginal revenue when 90 items are sold is 61 dollars per item. The cost, C(x), to produce 90 items is 1250 dollars. The marginal cost when 90 items are produced is 16 dollars per item. (a) Estimate the revenue from the sale of 89 items. (b) Estimate the cost from the sale of 94 items. (c) Estimate the profit from the sale of 91 items.

36

The Internal Revenue Service is a good example of a government for-profit entity that is always trying to proactively maximize their MC=MR.   

True or False

38

If the market price for a product is just one dollar above the average fixed cost curve, but still way below the average variable cost curve, then this should make the small business owner feel better. Standard microeconomic theory would recommend that they should still stay open for business until they can figure out how to become more profitable.   

True or False

39

What exactly does elasticity mean in microeconomics?

Multiple Choice

• The demand curve must first shift before we can determine the elasticity of demand.

• It measures the satisfaction of the consumer when they purchase items at different prices.   

• When we change quantity (the cause), then we will determine the price (the effect).

• When we change the price (the cause), then we will determine the quantity (the effect).

40

Let’s suppose that the state government orders that the minimum wage will be cut from $15.00 per hour to $4.00 per hour. We can probably assume that the new wage is a price ceiling and that the supply of labor will shrink, which will probably lead to a shortage of labor.

True or False

Suppose that at 500 units of output, the marginal revenue is equal to marginal cost. The firm is selling its output at $10 per unit and average total cost at 500 units of output is $6. On the basis of this information, we:

Given a diagram for a competitive firm, price or marginal revenue, be able to determine the profit maximizing quantity. Given the profit maximizing quantity, ATC and AVC, be able to determine how much the firm would lose if they were to produce versus shut-down. Lastly, state whether the firm should produce or shut down.

Suppose that the market demand is: P = 10 – Q, so that marginal revenue is: MR = 10 – 2Q.
The marginal cost is: MC = 4 and average cost is: AC = 4.
a. If the market structure is monopoly, determine the profit maximizing price and output for
this monopolist and calculate its economic profit or loss at the profit maximizing output.
b. If the market structure is perfect competition, determine the profit maximizing price and
total output and calculate a typical firm’s profit or loss at the profit maximizing output.
c. Which market structure is more efficient, i.e., monopoly or perfect competition? Why?

Use relevant diagrams to answer the question

A monopolist has a marginal revenue curve given by MR = 500 - 5Q, and a total cost curve given by TC = 1000 + 100Q. The monopolist has constant marginal cost of 100. What is the monopolist's demand curve? Calculate the monopolist's profit maximizing price and quantity. What is the monopolist's profit (or loss)? Show your work to the best of your ability.

What is deferred revenue expense and deferred expense? Give an example of each?