In Order to Maximize Profit, a Firm That Sells Its

question 20

Multiple Choice

In order to maximize profit, a firm that sells its output in two markets will allocate total output between the two markets so that:

• A) marginal revenue is equal in the two markets
• B) marginal revenue for the firm is equal to the sum of the marginal revenues
• C) marginal revenue for the firm is equal to the sum of the marginal costs
• D) both a and b
• E) none of the above

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Definitions:

Highly Inelastic

Describes a situation where demand or supply shows little to no response to changes in price, often due to the lack of close substitutes.

Highly Elastic

Describes a market situation where demand or supply of a good or service is very sensitive to changes in price.

Excise Tax

A tax imposed on the sale of specific goods and services, such as fuel, tobacco, and alcohol.

Burden

The negative impact, stress, or obligation imposed by a situation, decision, or policy.