Class 3 Test 3

What is the goal of every firm, regardless of the market structure?

• Maximize profits, minimize costs

• Maximize costs, minimize profits

• Enhance brand recognition
• Increase market share

Where does every firm, regardless of market structure, maximize economic profit?

• marginal revenue exceeds marginal cost

• marginal revenue is less than marginal cost

• marginal revenue equals marginal cost

Why is the goal of every firm not to maximize total revenue or minimize total cost?

• Because their goal is to maximize the distance between the two.

• Because their goal is to minimize the distance between the two.

• Because they don't like money.

• Because they only care about profits.

Economic profit (as opposed to accounting profit) is important because:

• It includes opportunity cost

• It takes tax into account

• It includes negative profit

• It includes all profit

The key feature of profit when compared to other sources of income:

• Profit is the residual

• Profit is the requesite

• Profit is the income before expenses are deducted

• Profit is all the money you have in excess

All of us are ultimately entrepreneur's because:

• We all take advantage of price discrepancies between different markets.

• We all like to buy high and sell low.

• We all control land, labor and capital.

• We deal with fixed costs where profit is uncertain.

If there is only one seller of a good, selling a good with no close substitutes, and barriers to entry are so high as to prevent any competition from entering the market,

• it is a monopoly

• it is competitive

• it has little competition

• it is an oligopoly

Profit is a signal. Without barriers to entry,

• no one will else will enter the market

• only some people will enter the market

• a lot of people will flood the market

• it is easy to be a monopoly

A price taker:

• sets the price

• are more competitive than price makers

• is usually a seller

• are less competitive than price makers

One major reason for control over price, like charging $5,000 for a gallon of water in the Sahara, is:

• Scarcity of resources
• Government regulation on prices
• High demand for luxury items
• Abundance of resources