Practice Questions
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Which of the following best describes the concept of efficiency in production when allocating resources for profit maximization?
Efficiency means making the most products using the least resources. Other options are incorrect because This option suggests that resources should be...
How does achieving economies of scale contribute to a firm's profit maximization?
When a company makes more products, the cost to make each one goes down. Other options are incorrect because Some might think that more variety in pro...
In the context of profit maximization, which of the following best describes the purpose of conducting a cost-benefit analysis when allocating resources?
A cost-benefit analysis helps find the best way to use resources. Other options are incorrect because Some might think this means just looking at how ...
In the context of profit maximization, how does understanding opportunity cost influence a firm's production function and overall efficiency in production?
Knowing opportunity cost helps firms choose the best resources. Other options are incorrect because Some might think ignoring other options is easier;...
In a perfectly competitive market, how would firms optimize resource allocation to achieve maximum profit when faced with varying elasticity of demand?
Firms maximize profit by producing where the cost of making one more item equals the money they earn from selling it. Other options are incorrect beca...
Which of the following best describes the concept of resource allocation in the context of profit maximization?
This choice is right because it focuses on using resources wisely to make the most profit. Other options are incorrect because This option suggests th...
Which of the following strategies is most effective for a firm aiming to maximize profit through resource allocation?
Investing in high-demand products helps a firm make more money. Other options are incorrect because Lowering prices for everything might seem smart, b...
What does the concept of opportunity cost refer to in the context of resource allocation for profit maximization?
Opportunity cost is what you give up when you choose one option over another. Other options are incorrect because This option confuses total costs wit...
A company analyzes its production process and finds that the marginal revenue product of labor is significantly higher than the wage rate. Which of the following actions should the company take based on the principle of resource allocation for profit maximization?
When the extra money made from hiring more workers is greater than what they are paid, the company should hire more. Other options are incorrect becau...
If the ratio of the marginal revenue product of labor to its wage is analogous to the efficiency of using labor, what would be the equivalent analogy for capital allocation?
The right way to measure how well we use capital is by looking at how much money it makes compared to its cost. Other options are incorrect because Th...
Arrange the following steps in the correct order for optimizing resource allocation for profit maximization in a firm:
First, you need to find out how much extra money each worker and machine makes. Other options are incorrect because This step comes after calculating ...
In the context of resource allocation for profit maximization, the principle states that firms should allocate resources so that the ratio of the ______ of labor to its wage equals the ratio of the ______ of capital to its price.
The marginal product of labor is how much extra output one more worker can produce. Other options are incorrect because Some might think average cost ...
A firm finds that the marginal revenue product of labor is twice that of capital. What should the firm do to maximize profit?
The firm should hire more workers and use less capital. Other options are incorrect because Some might think that increasing capital will help profits...
Which of the following statements correctly describe the principles of resource allocation for profit maximization? Select all that apply.
All the statements provided misunderstand how firms should allocate resources to maximize profits. Other options are incorrect because This suggests t...
If a firm finds that the marginal revenue product of labor is significantly higher than the wage it pays, which of the following is the most likely underlying cause for this situation?
When demand for a product goes up, companies need more workers to produce it. Other options are incorrect because Some might think that not using all ...
A small bakery is considering hiring an additional baker to increase production. Currently, the marginal product of labor is 15 loaves of bread per hour, while the baker's wage is $12 per hour. The bakery also plans to invest in a new oven that costs $1,200 and is expected to increase production by 100 loaves per day. If the marginal product of capital from the new oven is 50 loaves per day, should the bakery proceed with both the hiring of the new baker and the purchase of the oven based on the principles of resource allocation for profit maximization?
The bakery should go ahead because the new baker can make more loaves than they cost. Other options are incorrect because This answer thinks only labo...
What must a firm ensure when allocating resources for profit maximization?
A firm should compare the value of what it gets from labor and capital to what it pays. Other options are incorrect because Some might think labor is ...
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