3. When a firm is maximizing total profit it will necessarily be: i. maximizing

Question

3. When a firm is maximizing total profit it will necessarily be:
i. maximizing the difference between average revenue and average total cost
ii. maximizing the difference between total revenue and total cost
iii. minimizing total cost
iv. maximizing total revenue

7. The total revenue function for a perfectly competitive firm:
i. increases initially, reaches a maximum, and then decreases as the quantity of output that it sells increases
ii. increases by a constant amount as the quantity of output that it sells increases
iii. appears graphically as an upward sloping straight line from the origin with a slope that is equal to the market price of the good

22.Suppose a firm is producing at a break-even point. It follows that:
i. total variable cost is equal to total revenue
ii. total cost is equal to total revenue
iii. average variable cost is equal to average revenue
iv. average total cost is equal to average revenue

Explanation / Answer

3. When a firm is maximizing profit it will necessarily be maximizing the difference between total revenue and total cost. This is because as we know Total Profit = Total Revenue - Total Cost, so profit will be maximized when the difference between Total Revenue & Total Cost is maximum.

7. The total revenue function for a perfectly competitive firm increases by a constant amount as the quantity of output that it sells increases. Because in the perfect competitive market price and quantity is set by the demand of the buyers so price and quantity increases at constant rate.As Total Revenue = Price * Quantity so it will also increases at a constant rate.

22. Suppose a firm is producing at a break-even point. It follows that: total cost is equal to total revenue. The break-even point is a critical number that must be analyzed within a business. It is the point where sales and expenses are the same or when the sales of a company are enough to cover the expenses of the business.

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