1. Suppose that the firm's demand curve indicates that at a price of $10 per unit, customers will demand 2 million units of its product. Suppose that management decides to pick both price and output; the firm produces 3 million units of its product and prices them at $18 each. What will happen?

2. Suppose that a firm's management would be pleased to increase its share of the market but if it expands its production, the price of its product will fall. Will its profits necessarily fall? Why or why not?

3. A firm's marginal revenue is $133 and its marginal cost is $90. What amount of profit does the firm fail to pick up by refusing to increase output by one unit?

4. A firm's total cost is $1,000 if it produces one unit, $1,600 if it produces two units, and $2,000 if it produces three units of output. Draw up a table of total, average, and marginal costs for this firm.

5. A firm has the demand and total cost schedules given in the following table. If it wants to maximize profits, how much output should it produce?

Quantity Price Total Cost

1 $6 $ 1.00

25 2.50

3 4 6.00

4 3 7.00

5 2 11.0