Question 1

If C is total cost,Q is quantity,P is price,and A is total assets,the target return r is defined by:

Accepted Answer

A)  (PQ - 
C) /A. 
B)  [1 - (P - 
C) /Q]A. 
C)  [1 - (P - 
C) Q]A. 
D)  (P - 
C) Q/A. 
E)  1 - (P - 
C) Q/A. 
A)  (PQ - 
C) /A. 
B)  [1 - (P - 
C) /Q]A. 
C)  [1 - (P - 
C) Q]A. 
D)  (P - 
C) Q/A. 
E)  1 - (P - 
C) Q/A.

Question 2

A producer refuses to sell some of one joint product.MRA is the marginal revenue for a low-demand good.If the producer were to sell all its production,what would be true of MRA?

Accepted Answer

A)  MRA = demand for A. 
B)  MRA = 0. 
C)  MRA = marginal cost of A. 
D)  MRA A = 1. 
A)  MRA = demand for A. 
B)  MRA = 0. 
C)  MRA = marginal cost of A. 
D)  MRA A = 1.

Question 3

Bathworks has exclusive rights to sell its perfumes.The demand for its perfumes faced by Bathworks is given by Q = 250 - 0.5P.Bathworks's costs are given by TC = 50Q + 5.5Q2.Its maximum monopoly profit is:

Accepted Answer

A)  $6,750. 
B)  $7,050. 
C)  $7,500. 
D)  $7,750. 
E)  $8,750. 
A)  $6,750. 
B)  $7,050. 
C)  $7,500. 
D)  $7,750. 
E)  $8,750.

Question 4

If price P,unit costs C,and quantity Q are known,the markup of markup-cost pricing is:

Accepted Answer

A)  (PQ - CQ)/Q. 
B)  P - C/Q. 
C)  (P - 
C) /Q. 
D)  (P - 
C) /C. 
E)  1 - (P - 
C) /Q. 
A)  (PQ - CQ)/Q. 
B)  P - C/Q. 
C)  (P - 
C) /Q. 
D)  (P - 
C) /C. 
E)  1 - (P - 
C) /Q.

Question 5

If the demand curve is horizontal,the price elasticity used to calculate the profit-maximizing price is:

Accepted Answer

A)  -10. 
B)  -5. 
C)  -0. 
D)  -1. 
E)  infinity. 
A)  -10. 
B)  -5. 
C)  -0. 
D)  -1. 
E)  infinity.

Question 6

A firm with no costs producing Q units and charging price P gets a return of r on total assets of A if P equals:

Accepted Answer

A)  rA. 
B)  (1 + r)A. 
C)  (1 + r)A/Q. 
D)  rA/Q. 
E)  rAQ. 
A)  rA. 
B)  (1 + r)A. 
C)  (1 + r)A/Q. 
D)  rA/Q. 
E)  rAQ.

Question 7

If a firm in a monopolistically competitive industry is profit maximizing,it should choose its level of advertising such that the marginal revenue of an additional dollar of advertising:

Accepted Answer

A)  is equal to the elasticity of its demand curve minus 1. 
B)  is exactly $1. 
C)  increases revenues by $1. 
D)  is equal to 1 plus the elasticity of its demand curve. 
E)  is equal to the elasticity of its demand curve. 
A)  is equal to the elasticity of its demand curve minus 1. 
B)  is exactly $1. 
C)  increases revenues by $1. 
D)  is equal to 1 plus the elasticity of its demand curve. 
E)  is equal to the elasticity of its demand curve.

Question 8

So long as price exceeds average variable cost,in the model of monopoly,the firm maximizes profits by producing where:

Accepted Answer

A)  the difference between marginal revenue and marginal cost is maximized. 
B)  marginal revenue equals price. 
C)  the difference between price and marginal cost is maximized. 
D)  price equals marginal cost. 
E)  marginal cost equals marginal revenue. 
A)  the difference between marginal revenue and marginal cost is maximized. 
B)  marginal revenue equals price. 
C)  the difference between price and marginal cost is maximized. 
D)  price equals marginal cost. 
E)  marginal cost equals marginal revenue.

Question 9

If ç is the elasticity of demand,a profit maximizer sets a markup price of:

Accepted Answer

A)  MC[1/(1 + 1/$\eta$)]. 
B)  MC[1/(1 - 1/$\eta$)]. 
C)  AC[1/(1 - $\eta$)]. 
D)  AC[1/(1 - 1/$\eta$)]. 
E)  1/(1 - $\eta$). 
A)  MC[1/(1 + 1/$\eta$)]. 
B)  MC[1/(1 - 1/$\eta$)]. 
C)  AC[1/(1 - $\eta$)]. 
D)  AC[1/(1 - 1/$\eta$)]. 
E)  1/(1 - $\eta$).

Question 10

A producer of fixed proportion goods X and Y (Q = QX = QY)has marginal costs and revenues of MC = 12Q,MRX = 54 - 6QX,MRY = 126 - 12QY .The producer should produce how many units?

Accepted Answer

A)  3. 
B)  5.25. 
C)  6. 
D)  8.25. 
E)  10. 
A)  3. 
B)  5.25. 
C)  6. 
D)  8.25. 
E)  10.

Question 11

If revenues from selling quantities x and y of jointly produced goods X and Y were TRX = 100 - xy + 2x and TRY = 500 - xy + 3y,then marginal revenue with respect to X would be:

Accepted Answer

A)  -2 - y. 
B)  -y. 
C)  -x(2y + 5). 
D)  -(2y + 5). 
E)  2(1 - y). 
A)  -2 - y. 
B)  -y. 
C)  -x(2y + 5). 
D)  -(2y + 5). 
E)  2(1 - y).

Question 12

The ABC Company estimates that a newspaper advertising campaign would cost $25,000 and would generate $35,000 in new revenues.The firm should begin this campaign as long as:

Accepted Answer

A)  price elasticity of demand is at least 2.5 (in absolute value). 
B)  price elasticity of supply is 1. 
C)  price elasticity of demand is at least 1.4 (in absolute value). 
D)  marginal cost of production is no more than $25,000. 
E)  price elasticity of supply is 1.4. 
A)  price elasticity of demand is at least 2.5 (in absolute value). 
B)  price elasticity of supply is 1. 
C)  price elasticity of demand is at least 1.4 (in absolute value). 
D)  marginal cost of production is no more than $25,000. 
E)  price elasticity of supply is 1.4.

Question 13

Fred Stickwick produces fixed proportion goods A and B,with QA = QB,marginal costs MC,and marginal revenues MRA and MRB.If demand for A is greater than demand for B,Fred should only:

Accepted Answer

A)  produce B to the quantity where MRB = 0. 
B)  sell B to the quantity where MRB = 0 if MRA is still > MC. 
C)  produce B to the quantity where MRB = MC. 
D)  sell B to the quantity where MRB = MC. 
E)  produce B to the quantity where MRB = MRA. 
A)  produce B to the quantity where MRB = 0. 
B)  sell B to the quantity where MRB = 0 if MRA is still > MC. 
C)  produce B to the quantity where MRB = MC. 
D)  sell B to the quantity where MRB = MC. 
E)  produce B to the quantity where MRB = MRA.

Question 14

In the model of monopoly,firms produce a:

Accepted Answer

A)  standardized product with considerable control over price. 
B)  differentiated product with considerable control over price. 
C)  standardized product with no control over price. 
D)  differentiated product with no control over price. 
E)  standardized or differentiated product with some control over price. 
A)  standardized product with considerable control over price. 
B)  differentiated product with considerable control over price. 
C)  standardized product with no control over price. 
D)  differentiated product with no control over price. 
E)  standardized or differentiated product with some control over price.

Question 15

If the profit-maximizing markup price is marginal cost times 2,the elasticity of demand must be:

Accepted Answer

A)  -0. 
B)  -1/2. 
C)  -1. 
D)  -4/3. 
E)  -2. 
A)  -0. 
B)  -1/2. 
C)  -1. 
D)  -4/3. 
E)  -2.

Question 16

In the model of monopolistic competition,firms produce a:

Accepted Answer

A)  standardized product with considerable control over price. 
B)  differentiated product with considerable control over price. 
C)  standardized product with no control over price. 
D)  differentiated product with no control over price. 
E)  differentiated product with some control over price. 
A)  standardized product with considerable control over price. 
B)  differentiated product with considerable control over price. 
C)  standardized product with no control over price. 
D)  differentiated product with no control over price. 
E)  differentiated product with some control over price.

Question 17

Jack O.Trades produces joint products A and B with linear demands DA > DB.Given MRB is marginal revenue for B and MCB is marginal cost of B,Jack's total marginal revenue curve changes slope at the quantity where:

Accepted Answer

A)  MRB = MCB. 
B)  DB = MCB. 
C)  MRB = DB. 
D)  MRB = 0. 
E)  DB = 0. 
A)  MRB = MCB. 
B)  DB = MCB. 
C)  MRB = DB. 
D)  MRB = 0. 
E)  DB = 0.

Question 18

In the model of monopoly,there:

Accepted Answer

A)  are many firms producing differentiated products. 
B)  are a few firms producing undifferentiated products. 
C)  are a few firms producing differentiated products. 
D)  are many firms producing undifferentiated products. 
E)  is one firm producing a highly differentiated product. 
A)  are many firms producing differentiated products. 
B)  are a few firms producing undifferentiated products. 
C)  are a few firms producing differentiated products. 
D)  are many firms producing undifferentiated products. 
E)  is one firm producing a highly differentiated product.

Question 19

Craig's Red Sea Restaurant is the only restaurant in Columbia,South Carolina,that sells Ethiopian food.The demand for Ethiopian food is given by Q = 25 - P.Craig's costs are given by TC = 25 + Q + 5Q2.Its maximum monopoly profit is:

Accepted Answer

A)  -$1. 
B)  $21. 
C)  $22. 
D)  $24. 
E)  $26. 
A)  -$1. 
B)  $21. 
C)  $22. 
D)  $24. 
E)  $26.

Question 20

At the profit-maximizing level of output for the monopolist:

Accepted Answer

A)  total revenue is equal to total cost. 
B)  total costs are minimized. 
C)  total revenue is maximized. 
D)  marginal revenue is equal to marginal cost. 
E)  average revenue is equal to average cost. 
A)  total revenue is equal to total cost. 
B)  total costs are minimized. 
C)  total revenue is maximized. 
D)  marginal revenue is equal to marginal cost. 
E)  average revenue is equal to average cost.

If C is total cost,Q is quantity,P is price,and A is total assets,the target return r is defined by:

A producer refuses to sell some of one joint product.MR_A is the marginal revenue for a low-demand good.If the producer were to sell all its production,what would be true of MR_A?

Bathworks has exclusive rights to sell its perfumes.The demand for its perfumes faced by Bathworks is given by Q = 250 - 0.5P.Bathworks's costs are given by TC = 50Q + 5.5Q².Its maximum monopoly profit is:

If price P,unit costs C,and quantity Q are known,the markup of markup-cost pricing is:

If the demand curve is horizontal,the price elasticity used to calculate the profit-maximizing price is:

A firm with no costs producing Q units and charging price P gets a return of r on total assets of A if P equals:

If a firm in a monopolistically competitive industry is profit maximizing,it should choose its level of advertising such that the marginal revenue of an additional dollar of advertising:

So long as price exceeds average variable cost,in the model of monopoly,the firm maximizes profits by producing where:

If ç is the elasticity of demand,a profit maximizer sets a markup price of:

A producer of fixed proportion goods X and Y (Q = Q_X = Q_Y)has marginal costs and revenues of MC = 12Q,MR_X = 54 - 6Q_X,MR_Y = 126 - 12Q_Y.The producer should produce how many units?

If revenues from selling quantities x and y of jointly produced goods X and Y were TR_X = 100 - xy + 2x and TR_Y = 500 - xy + 3y,then marginal revenue with respect to X would be:

The ABC Company estimates that a newspaper advertising campaign would cost $25,000 and would generate $35,000 in new revenues.The firm should begin this campaign as long as:

Fred Stickwick produces fixed proportion goods A and B,with Q_A = Q_B,marginal costs MC,and marginal revenues MR_A and MR_B.If demand for A is greater than demand for B,Fred should only:

In the model of monopoly,firms produce a:

If the profit-maximizing markup price is marginal cost times 2,the elasticity of demand must be:

In the model of monopolistic competition,firms produce a:

Jack O.Trades produces joint products A and B with linear demands D_A > D_B.Given MR_B is marginal revenue for B and MC_B is marginal cost of B,Jack's total marginal revenue curve changes slope at the quantity where:

In the model of monopoly,there:

Craig's Red Sea Restaurant is the only restaurant in Columbia,South Carolina,that sells Ethiopian food.The demand for Ethiopian food is given by Q = 25 - P.Craig's costs are given by TC = 25 + Q + 5Q².Its maximum monopoly profit is:

At the profit-maximizing level of output for the monopolist:

Introduction

Demand Theory

Consumer Behavior and Rational Choice

Estimating Demand Functions

Production Theory

The Analysis of Costs

Perfect Competition

Managerial Use of Price Discrimination

Bundling and Intrafirm Pricing

Oligopoly

Game Theory

Auctions

Risk Analysis

Principalagent Issues and Managerial Compensation

Adverse Selection

Government and Business

Optimization Techniques

Appendix Problems

Filters

Exam 8: Monopoly and Monopolistic Competition

If C is total cost,Q is quantity,P is price,and A is total assets,the target return r is defined by:

A producer refuses to sell some of one joint product.MRA is the marginal revenue for a low-demand good.If the producer were to sell all its production,what would be true of MRA?

Bathworks has exclusive rights to sell its perfumes.The demand for its perfumes faced by Bathworks is given by Q = 250 - 0.5P.Bathworks's costs are given by TC = 50Q + 5.5Q2.Its maximum monopoly profit is:

If price P,unit costs C,and quantity Q are known,the markup of markup-cost pricing is:

If the demand curve is horizontal,the price elasticity used to calculate the profit-maximizing price is:

A firm with no costs producing Q units and charging price P gets a return of r on total assets of A if P equals:

If a firm in a monopolistically competitive industry is profit maximizing,it should choose its level of advertising such that the marginal revenue of an additional dollar of advertising:

So long as price exceeds average variable cost,in the model of monopoly,the firm maximizes profits by producing where:

If ç is the elasticity of demand,a profit maximizer sets a markup price of:

A producer of fixed proportion goods X and Y (Q = QX = QY)has marginal costs and revenues of MC = 12Q,MRX = 54 - 6QX,MRY = 126 - 12QY .The producer should produce how many units?

If revenues from selling quantities x and y of jointly produced goods X and Y were TRX = 100 - xy + 2x and TRY = 500 - xy + 3y,then marginal revenue with respect to X would be:

The ABC Company estimates that a newspaper advertising campaign would cost $25,000 and would generate $35,000 in new revenues.The firm should begin this campaign as long as:

Fred Stickwick produces fixed proportion goods A and B,with QA = QB,marginal costs MC,and marginal revenues MRA and MRB.If demand for A is greater than demand for B,Fred should only:

In the model of monopoly,firms produce a:

If the profit-maximizing markup price is marginal cost times 2,the elasticity of demand must be:

In the model of monopolistic competition,firms produce a:

Jack O.Trades produces joint products A and B with linear demands DA > DB.Given MRB is marginal revenue for B and MCB is marginal cost of B,Jack's total marginal revenue curve changes slope at the quantity where:

In the model of monopoly,there:

Craig's Red Sea Restaurant is the only restaurant in Columbia,South Carolina,that sells Ethiopian food.The demand for Ethiopian food is given by Q = 25 - P.Craig's costs are given by TC = 25 + Q + 5Q2.Its maximum monopoly profit is:

At the profit-maximizing level of output for the monopolist:

Introduction

Demand Theory

Consumer Behavior and Rational Choice

Estimating Demand Functions

Production Theory

The Analysis of Costs

Perfect Competition

Managerial Use of Price Discrimination

Bundling and Intrafirm Pricing

Oligopoly

Game Theory

Auctions

Risk Analysis

Principalagent Issues and Managerial Compensation

Adverse Selection

Government and Business

Optimization Techniques

Appendix Problems

Filters

A producer refuses to sell some of one joint product.MR_A is the marginal revenue for a low-demand good.If the producer were to sell all its production,what would be true of MR_A?

Bathworks has exclusive rights to sell its perfumes.The demand for its perfumes faced by Bathworks is given by Q = 250 - 0.5P.Bathworks's costs are given by TC = 50Q + 5.5Q².Its maximum monopoly profit is:

A producer of fixed proportion goods X and Y (Q = Q_X = Q_Y)has marginal costs and revenues of MC = 12Q,MR_X = 54 - 6Q_X,MR_Y = 126 - 12Q_Y.The producer should produce how many units?

If revenues from selling quantities x and y of jointly produced goods X and Y were TR_X = 100 - xy + 2x and TR_Y = 500 - xy + 3y,then marginal revenue with respect to X would be:

Fred Stickwick produces fixed proportion goods A and B,with Q_A = Q_B,marginal costs MC,and marginal revenues MR_A and MR_B.If demand for A is greater than demand for B,Fred should only:

Jack O.Trades produces joint products A and B with linear demands D_A > D_B.Given MR_B is marginal revenue for B and MC_B is marginal cost of B,Jack's total marginal revenue curve changes slope at the quantity where:

Craig's Red Sea Restaurant is the only restaurant in Columbia,South Carolina,that sells Ethiopian food.The demand for Ethiopian food is given by Q = 25 - P.Craig's costs are given by TC = 25 + Q + 5Q².Its maximum monopoly profit is: