The market demand curve is given by P = 40 - 0.2Q. What is the profit-maximizing output? A. Profit is maximized at output level, Q*=40. B. Profit is maximized at output level, Q*=100. C. Total revenue is maximized at output, Q*=200. D. Profit is maximized at output level, Q* = 80.

I. A company produces at an output level where marginal cost is equal to marginal revenue and has the following revenue and cost levels: Total revenue = $1,450 Total cost = $1,500 Total variable cost = $1,300 What would you suggest? a. Shut down. b. Continue to produce because the loss is less than the total fixed cost. c. Increase production to lower the marginal cost. e. Raise the price. II. At current long-run production levels, the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15. If the market is perfectly competitive, the firm should a. cut back on production. b. stop production all together. c. produce more. d. continue producing at current levels.

Suppose you own fast food takeaway shops, one in Glebe, with lots of competition, and one in Tibooburra, with little competition. In Glebe, the price elasticity of demand is -2.5, while in Tibooburra, it is -2.0. Assume the marginal cost of providing a combo burger is $10. What are the optimal prices of a combo burger in each location?

Determine whether the following statements are TRUE or FALSE. Explain your answer using graphs or examples. a. If a firm has zero elasticity substitution between inputs, then the short-run cost of producing a level of output equals the long-run cost. b. For firms in a competitive market, producing a maximizing profit quantity always means minimizing cost, while the reverse is not true.