Economics of Profit Maximization Quiz

Profit maximization involves optimizing the balance between total revenue and total cost.

Total revenue is obtained by multiplying the price per unit by the quantity sold.

The primary goal of profit maximization is to optimize the gap between revenue and costs.

Perfect competition is characterized by firms lacking individual market power.

A monopolist maximizes profit where marginal cost equals marginal revenue.

In perfect competition, firms maximize profit where marginal cost equals marginal revenue.

Monopolistic competition allows firms to exert some influence over pricing.

Economic profit is the difference between total revenue and all associated costs, both explicit and implicit.

In the long run, a perfectly competitive firm maximizes profit where marginal revenue equals marginal cost.

Oligopoly is characterized by the presence of a few large firms dominating the market.

Marginal revenue is the extra revenue from selling one additional unit of a good or service.

A decrease in variable costs leads to an increase in the short-run output level for a firm.

The shut-down point in the short run is where average total cost equals average variable cost.

The key assumption is that firms in economics aim to maximize their profits.

Price elasticity of demand and marginal revenue are inversely proportional for a monopolist.

A decrease in fixed costs leads to an increase in the short-run output level for a firm.

Increased competition leads to a decrease in a monopolist's profit.