Question 1

Which of the following is true of a perfectly competitive firm and a monopoly in the long run?

Accepted Answer

A)  P = MC 
B)  P = ATC 
C)  MR = MC 
D)  P = MR 
A)  P = MC 
B)  P = ATC 
C)  MR = MC 
D)  P = MR

Question 2

Discuss and explain the relationships between the monopolist's demand curve, average revenue curve, and marginal revenue curve.

Accepted Answer

The monopolist's demand curve is the ind

Question 3

A monopolist maximizes profits by finding

Accepted Answer

A)  the rate of output where marginal revenue equals marginal cost. 
B)  the rate of output where price equals marginal cost. 
C)  the price where price exceeds marginal revenue by that largest amount. 
D)  the price where average revenue and marginal cost are equal. 
A)  the rate of output where marginal revenue equals marginal cost. 
B)  the rate of output where price equals marginal cost. 
C)  the price where price exceeds marginal revenue by that largest amount. 
D)  the price where average revenue and marginal cost are equal.

Question 4

Which of the following statements about the elasticity of demand for a monopolist is TRUE?

Accepted Answer

A)  Since a monopolist produces a good with no close substitutes, the price elasticity of demand for the good is zero. 
B)  A monopolist produces a good with demand that is perfectly inelastic because people can not do without the good. 
C)  Since every good has some substitute, even if imperfect, the demand for a good produced by a monopolist will not have zero price elasticity. 
D)  Since the demand curve of a monopolist is downward sloping, the demand for the good must be inelastic. 
A)  Since a monopolist produces a good with no close substitutes, the price elasticity of demand for the good is zero. 
B)  A monopolist produces a good with demand that is perfectly inelastic because people can not do without the good. 
C)  Since every good has some substitute, even if imperfect, the demand for a good produced by a monopolist will not have zero price elasticity. 
D)  Since the demand curve of a monopolist is downward sloping, the demand for the good must be inelastic.

Question 5

-Refer to the above table. Given the demand and cost schedules, what is the profit maximizing quantity for this monopolist?

Accepted Answer

A)  14 
B)  19 
C)  25 
D)  30 
A)  14 
B)  19 
C)  25 
D)  30

Question 6

-Use the above figure. Total revenue at the profit-maximizing output is

Accepted Answer

A)  $4,800. 
B)  $9,600. 
C)  $5,600. 
D)  $8,000. 
A)  $4,800. 
B)  $9,600. 
C)  $5,600. 
D)  $8,000.

Question 7

The monopolist determines the price and quantity combination that maximizes short-run profits by

Accepted Answer

A)  finding the quantity at which marginal cost and marginal revenue are equal and then using the demand curve to find price. 
B)  determining the price by finding the highest price at which sales can be made and then using the demand curve to find the appropriate quantity. 
C)  finding the point at which marginal revenue and demand intersect. This gives the price and quantity that maximizes profits. 
D)  finding the quantity at which average revenue and average total cost are furthest apart. 
A)  finding the quantity at which marginal cost and marginal revenue are equal and then using the demand curve to find price. 
B)  determining the price by finding the highest price at which sales can be made and then using the demand curve to find the appropriate quantity. 
C)  finding the point at which marginal revenue and demand intersect. This gives the price and quantity that maximizes profits. 
D)  finding the quantity at which average revenue and average total cost are furthest apart.

Question 8

If a monopolist produces to a point at which marginal revenue is less than marginal cost then

Accepted Answer

A)  profits are being maximized. 
B)  profits will always be negative. 
C)  the incremental cost of producing the last unit exceeds the incremental revenue. 
D)  the incremental cost of producing the last unit is less than the incremental revenue. 
A)  profits are being maximized. 
B)  profits will always be negative. 
C)  the incremental cost of producing the last unit exceeds the incremental revenue. 
D)  the incremental cost of producing the last unit is less than the incremental revenue.

Question 9

Which of the following statements is true about the price that a monopolist charges?

Accepted Answer

A)  The price is the same as the price that would be charged if there was perfect competition. 
B)  The difference between the price charged by a monopolist and a perfect competitor is due to differences in costs. 
C)  The value that society places on the last unit produced in a monopoly is greater than its cost. 
D)  Too much of the good is being produced in a competitive market and not enough is being produced in a monopoly. Due to the way that prices are set. 
A)  The price is the same as the price that would be charged if there was perfect competition. 
B)  The difference between the price charged by a monopolist and a perfect competitor is due to differences in costs. 
C)  The value that society places on the last unit produced in a monopoly is greater than its cost. 
D)  Too much of the good is being produced in a competitive market and not enough is being produced in a monopoly. Due to the way that prices are set.

Question 10

Using a graph, show the profits of a monopoly. Suppose fixed costs increased enough to make the firm earn an economic loss. Show such a situation. Would the monopolist earn economic losses in the long run? Why or why not?

Accepted Answer

@#IMG-DLM& In the above figure, the monopolist pro

Question 11

Suppose that the profit maximizing level of output for the monopolist is 100 units, and ATC = $45.00; MC = $35.00; MR = $35.00; P = $50.00. What is the monopoly's profit?

Accepted Answer

A)  -$1000 
B)  $4500 
C)  $5000 
D)  $500 
A)  -$1000 
B)  $4500 
C)  $5000 
D)  $500

Question 12

Which of the following is a characteristic of a monopoly firm?

Accepted Answer

A)  horizontal individual demand curve 
B)  barriers to entry 
C)  easy entry and exit 
D)  many buyers and sellers 
A)  horizontal individual demand curve 
B)  barriers to entry 
C)  easy entry and exit 
D)  many buyers and sellers

Question 13

A major difference between a monopolist and a perfectly competitive firm is that

Accepted Answer

A)  the monopolist is certain to earn economic profits. 
B)  the monopolist's marginal revenue curve lies below its demand curve. 
C)  the monopolist engages in marginal cost pricing. 
D)  the monopolist charges the highest possible price that he can. 
A)  the monopolist is certain to earn economic profits. 
B)  the monopolist's marginal revenue curve lies below its demand curve. 
C)  the monopolist engages in marginal cost pricing. 
D)  the monopolist charges the highest possible price that he can.

Question 14

Which of the following statements is FALSE?

Accepted Answer

A)  An unregulated, profit-maximizing monopolist will not operate in the inelastic portion of the demand curve. 
B)  The marginal revenue earned by a monopolist will always be less than the product's price. 
C)  Typically there are numerous very close substitutes for the product of a monopolist. 
D)  For a profit-maximizing monopolist, marginal revenue equals marginal cost. 
A)  An unregulated, profit-maximizing monopolist will not operate in the inelastic portion of the demand curve. 
B)  The marginal revenue earned by a monopolist will always be less than the product's price. 
C)  Typically there are numerous very close substitutes for the product of a monopolist. 
D)  For a profit-maximizing monopolist, marginal revenue equals marginal cost.

Question 15

Assume that a monopoly is producing at a profit-maximizing output level. If the firm's total fixed costs decrease, the firm

Accepted Answer

A)  should lower its price. 
B)  should increase its price. 
C)  should continue to produce at the same level. 
D)  increase its output level. 
A)  should lower its price. 
B)  should increase its price. 
C)  should continue to produce at the same level. 
D)  increase its output level.

Question 16

Monopolies misallocate resources because

Accepted Answer

A)  price does not equal marginal cost. 
B)  price does not equal average variable cost. 
C)  marginal cost does not equal average total cost. 
D)  profits are usually positive. 
A)  price does not equal marginal cost. 
B)  price does not equal average variable cost. 
C)  marginal cost does not equal average total cost. 
D)  profits are usually positive.

Question 17

Using a graph, show why marginal revenue is always less than price.

Accepted Answer

@#IMG-DLM& The demand curve slopes down so the fir

Question 18

Which of the following would best describe the demand curve faced by a monopoly firm?

Accepted Answer

A)  horizontal line at the market price 
B)  vertical line at the output level 
C)  same as the market demand curve 
D)  same as the perfect competitor's demand curve 
A)  horizontal line at the market price 
B)  vertical line at the output level 
C)  same as the market demand curve 
D)  same as the perfect competitor's demand curve

Question 19

In a perfectly competitive market in which identical firms face the same horizontal marginal cost curve, if demand increases, then the amount of consumer surplus will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  become negative. 
D)  not change. 
A)  increase. 
B)  decrease. 
C)  become negative. 
D)  not change.

Question 20

A monopoly will look for opportunities to price discriminate because the practice

Accepted Answer

A)  leads to selling more units. 
B)  leads to greater profits. 
C)  allows it to charge higher prices. 
D)  is desired by customers. 
A)  leads to selling more units. 
B)  leads to greater profits. 
C)  allows it to charge higher prices. 
D)  is desired by customers.

Exam 24: Monopoly

Which of the following is true of a perfectly competitive firm and a monopoly in the long run?

Discuss and explain the relationships between the monopolist's demand curve, average revenue curve, and marginal revenue curve.

A monopolist maximizes profits by finding

Which of the following statements about the elasticity of demand for a monopolist is TRUE?

-Refer to the above table. Given the demand and cost schedules, what is the profit maximizing quantity for this monopolist?

-Use the above figure. Total revenue at the profit-maximizing output is

The monopolist determines the price and quantity combination that maximizes short-run profits by

If a monopolist produces to a point at which marginal revenue is less than marginal cost then

Which of the following statements is true about the price that a monopolist charges?

Using a graph, show the profits of a monopoly. Suppose fixed costs increased enough to make the firm earn an economic loss. Show such a situation. Would the monopolist earn economic losses in the long run? Why or why not?

Suppose that the profit maximizing level of output for the monopolist is 100 units, and ATC = $45.00; MC = $35.00; MR = $35.00; P = $50.00. What is the monopoly's profit?

Which of the following is a characteristic of a monopoly firm?

A major difference between a monopolist and a perfectly competitive firm is that

Which of the following statements is FALSE?

Assume that a monopoly is producing at a profit-maximizing output level. If the firm's total fixed costs decrease, the firm

Monopolies misallocate resources because

Using a graph, show why marginal revenue is always less than price.

Which of the following would best describe the demand curve faced by a monopoly firm?

In a perfectly competitive market in which identical firms face the same horizontal marginal cost curve, if demand increases, then the amount of consumer surplus will

A monopoly will look for opportunities to price discriminate because the practice

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