ECON 528 preparation test questions and correct answers GRADED A +

ECON 528 PREPARATION
TEST QUESTIONS AND
CORRECT ANSWERS
GRADED A + 2025-2026
Value= - ANS-=sum(t=1...n)((TRt)-TCt) / (1+i)t


where


t = time period / # of years
i = discount rate = current interest rate


firm value is maximized when: - ANS-total revenue is maximized


total cost for a given output is minimized


total cost = - ANS-average cost x quantity produced


AC x Q


Minimizing average cost also minimizes - ANS-total cost for a given output


Minimizing average cost also maximizes - ANS-firm value


Minimizing Total Cost also maximizes - ANS-firm value

, total revenue is a function of - ANS-output quantity


Total Revenue = - ANS-Price x Quantity


PxQ


If demand is linear, then price = - ANS-a + bQ


where


Q is quantity demanded


a is the y-intercept (price intercept) and b is the slope coefficient


marginal revenue = - ANS-change in total revenue / change in quantity produced


^TR / ^Q


total revenue is maximized where - ANS-marginal revenue = 0 and increasing output
quantity causes marginal revenue to decrease


Total Cost = - ANS-Fixed Cost + Variable Cost


FC + VC


Profits = - ANS-total revenue - total costs


TR - TC