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Chapter 20: Problem 29

We find price by dividing __________ (LO8) a) total revenue by output b) output by total revenue c) total cost by output d) output by total cost

Short Answer

Expert verified
We find price by dividing (a) total revenue by output.

Step by step solution

01

Understanding the concepts

Price is the amount a customer is willing to pay for a product or service. In economics, price can be calculated in a market economy through the forces of supply and demand. However, in terms of total revenue and output, price is found by dividing total revenue by output.
02

Evaluating each choice

Let's evaluate each option: a) Total revenue by output - This is the correct formula for calculating price as Price = Total Revenue/Output. b) Output by total revenue - This is not correct as it would give the reciprocal of price. c) Total cost by output - This is the correct formula for calculating Average total cost, not price. d) Output by total cost - This is not correct, it would give the reciprocal of Average total cost.
03

Selecting the correct answer

Based on our evaluation in step 2, the correct option to find Price is (a) Total revenue divided by output.

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Most popular questions from this chapter

Which of the following is most likely to be a variable cost? (LO1) a) Real estate taxes b) Rental payments of IBM equipment c) Interest on bonded indebtedness d) Fuel and power payments

As output increases, eventually __________ (LO7) a) economies of scale become larger than diseconomies of scale b) diseconomies of scale become larger than economies of scale c) economies of scale and diseconomies of scale both increase d) economies of scale and diseconomies of scale both decrease

If AVC is declining, then __________ (LO5) a) marginal cost must be less than AVC b) marginal cost must be greater than ATC c) AVC must be greater than AFC

As output expands to larger and larger numbers, __________ continues to decline. (LO5) a) \(\mathrm{AFC}\) b) \(\mathrm{AVC}\) c) \(\mathrm{ATC}\) d) \(\mathrm{MC}\)

In general a firm's __________ (LO2) a) total cost rises as output rises up to a certain point and then begins to decline b) marginal cost rises as output rises up to a certain point and then begins to decline c) average total cost declines as output rises up to a certain point and then begins to rise
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