Question 1

A firm has a total cost function of C(Q)= 75 + 25Q1/2.The firm experiences:

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  constant returns to scale. 
D)  All of the statements associated with this question are correct. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  constant returns to scale. 
D)  All of the statements associated with this question are correct.

Question 2

You are the manager of a monopoly that faces a demand curve described by P = 85 − 5Q.Your costs are C = 20 + 5Q.The revenue-maximizing output is:

Accepted Answer

A)  .85. 
B)  9. 
C)  10. 
D)  None of the preceding answers is correct. 
A)  .85. 
B)  9. 
C)  10. 
D)  None of the preceding answers is correct.

Question 3

Which of the following is true under monopoly?

Accepted Answer

A)  Profits are always positive. 
B)  P > minimum of ATC. 
C)  P = MR. 
D)  None of the preceding answers is correct. 
A)  Profits are always positive. 
B)  P > minimum of ATC. 
C)  P = MR. 
D)  None of the preceding answers is correct.

Question 4

The primary difference between monopolistic competition and perfect competition is:

Accepted Answer

A)  the ease of entry and exit into the industry. 
B)  the number of firms in the market. 
C)  Both A and B are correct. 
D)  None of the preceding answers is correct. 
A)  the ease of entry and exit into the industry. 
B)  the number of firms in the market. 
C)  Both A and B are correct. 
D)  None of the preceding answers is correct.

Question 5

What is the primary facet of monopolistic competition that does not allow for the presence of long-run profits?
 If firms are making short-run profits in a monopolistically competitive industry,what will eventually occur that will cause long-run economic profits to be zero?

Accepted Answer

The driving force of zero long-run profi

Question 6

Suppose you are a monopolist operating two plants at different locations.Both plants produce the same product; Q1 is the quantity produced at plant 1,and Q2 is the quantity produced at plant 2.You face the following inverse demand function:
 P = 500 - 2Q,where Q = Q1 + Q2.The cost functions for the two plants are
 $C _ { 1 } = 25 + 2 Q _ { 1 } ^ { 2 }$ ; $C _ { 2 } = 20 + Q _ { 2 } ^ { 2 }$ .
a.What are your marginal revenue and marginal cost functions?
b.To maximize profits,how much should you produce at plant 1?
 At plant 2?
c.What is the price that maximizes profits?
d.What are the maximum profits?

Accepted Answer

a.MR = 500 − 4Q; MC₁ = 4Q₁; MC₂ = 2Q₂. b.Pro

Question 7

You are the manager of a monopoly that faces a demand curve described by P = 80 − 5Q.Your costs are C = 10 + 5Q.The revenue-maximizing output is:

Accepted Answer

A)  2.5. 
B)  5. 
C)  8. 
D)  None of the preceding answers is correct. 
A)  2.5. 
B)  5. 
C)  8. 
D)  None of the preceding answers is correct.

Question 8

In the long run,monopolistically competitive firms produce a level of output such that:

Accepted Answer

A)  P > MC. 
B)  P = ATC. 
C)  ATC > minimum of average costs. 
D)  All of the statements associated with this question are correct. 
A)  P > MC. 
B)  P = ATC. 
C)  ATC > minimum of average costs. 
D)  All of the statements associated with this question are correct.

Question 9

The second-order condition for a firm maximizing its profit operating in a monopolistically competitive market is:

Accepted Answer

A)  −(d2C(Q)/dQ2) 2R (Q)/dQ2) − (d2C(Q)/dQ2) 2R (Q)/dQ2) = (d2C(Q)/dQ2). 
D)  (dMR/dQ) > (dMC/dQ). 
A)  −(d2C(Q)/dQ2) 2R (Q)/dQ2) − (d2C(Q)/dQ2) 2R (Q)/dQ2) = (d2C(Q)/dQ2). 
D)  (dMR/dQ) > (dMC/dQ).

Question 10

What contributes to the existence of multiproduct firms?

Accepted Answer

A)  Economies of scale 
B)  Economies of scope 
C)  Cost complementarity 
D)  Economies of scope and cost complementarity 
A)  Economies of scale 
B)  Economies of scope 
C)  Cost complementarity 
D)  Economies of scope and cost complementarity

Question 11

Differentiated goods are a feature of a:

Accepted Answer

A)  perfectly competitive market. 
B)  monopolistically competitive market. 
C)  monopolistic market. 
D)  monopolistically competitive market and monopolistic market. 
A)  perfectly competitive market. 
B)  monopolistically competitive market. 
C)  monopolistic market. 
D)  monopolistically competitive market and monopolistic market.

Question 12

You are the manager of a monopoly that faces a demand curve described by P = 10 − 2Q.Your costs are C = 20 + 2Q.The revenue-maximizing output is:

Accepted Answer

A)  1.5. 
B)  3. 
C)  4. 
D)  None of the preceding answers is correct. 
A)  1.5. 
B)  3. 
C)  4. 
D)  None of the preceding answers is correct.

Question 13

The XYZ Company produces output using labor (which it purchases on an as-needed basis in the market for unskilled workers at a wage of $5 per hour)and one machine (which it is obligated to lease at a rental rate of $300 per hour).The planning horizon precludes XYZ from renting or purchasing any additional machines,as the current machine has a capacity of 80 units of output per hour,which exceeds the projected demand for the firm's product.The firm has no alternative use for the machine it leases,and the contract precludes it from subleasing it to another party.The company currently employs one worker who produces 10 units of output per hour.A recent report from the engineering department reveals that,given the plant's current capacity,two workers could produce 20 units of output per hour,three workers could produce 30 units of output per hour,and four workers could produce a total of 40 units of output per hour.
a.Complete the following table:
 $$\begin{array}{l}
\text { Hourly Cost Data , XYZ Corrpary }\
\begin{array} { | l | l | l | l | } 
\hline \text { Output } & \text { Variable Cost } & \text { Margiral Cost } & \text { Average Variable Cost } \
\hline 0 & & & \
\hline 10 & & & \
\hline 20 & & & \
\hline 30 & & & \
\hline 40 & & & \
\hline
\end{array}
\end{array}$$ b.Suppose that XYZ can sell up to 40 units of output per hour at a price of $.60 per unit but cannot even get a penny for units produced in excess of 40 units per hour.How much output should XYZ produce each hour in order to maximize profits?
c.At what price would XYZ find it profitable to shut down its operation?

Accepted Answer

a.See table below:
 \[\begin{array} { |

Question 14

A perfectly competitive firm faces a:

Accepted Answer

A)  perfectly elastic demand function. 
B)  perfectly inelastic demand function. 
C)  demand function with unitary elasticity. 
D)  None of the preceding answers is correct. 
A)  perfectly elastic demand function. 
B)  perfectly inelastic demand function. 
C)  demand function with unitary elasticity. 
D)  None of the preceding answers is correct.

Question 15

A monopoly has two production plants with cost functions C1 = 50 + 0.1Q12 and C2 = 30 + 0.05Q22.The demand it faces is Q = 500 − 10P.What is the profit-maximizing level of output?

Accepted Answer

A)  Q1 = 62.5; Q2 = 125. 
B)  Q1 = 125; Q2 = 62.5. 
C)  Q1 = Q2 = 125. 
D)  Q1 = Q2 = 62.5. 
A)  Q1 = 62.5; Q2 = 125. 
B)  Q1 = 125; Q2 = 62.5. 
C)  Q1 = Q2 = 125. 
D)  Q1 = Q2 = 62.5.

Question 16

In a monopoly where the marginal revenue and price are,respectively,given by $0.50 and $2,the price elasticity of demand is:

Accepted Answer

A)  −0.75. 
B)  −1 
C)  −5/4 
D)  −4/3. 
A)  −0.75. 
B)  −1 
C)  −5/4 
D)  −4/3.

Question 17

You are the manager of a firm that produces output in two plants.The demand for your firm's product is P = 120 − 6Q,where Q = Q1 + Q2.The marginal costs associated with producing in the two plants are MC1 = 2Q1 and MC2 = 4Q2.What price should be charged in order to maximize revenues?

Accepted Answer

A)  6 
B)  2 
C)  24 
D)  60 
A)  6 
B)  2 
C)  24 
D)  60

Question 18

You are the manager of a firm that produces output in two plants.The demand for your firm's product is P = 96 − 15Q,where Q = Q1 + Q2.The marginal costs associated with producing in the two plants are MC1 = 6Q1 and MC2 = 3Q2.How much output should be produced in plant 2 in order to maximize profits?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 19

Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets?

Accepted Answer

A)  Firms produce homogeneous goods. 
B)  There is free entry. 
C)  Long-run profits are zero. 
D)  There is free entry and long-run profits are zero. 
A)  Firms produce homogeneous goods. 
B)  There is free entry. 
C)  Long-run profits are zero. 
D)  There is free entry and long-run profits are zero.

Question 20

A firm has a total cost function of C(Q)= 50 + 10Q1/2.The firm experiences:

Accepted Answer

A)  economies of scale. 
B)  constant returns to scale. 
C)  diseconomies of scale. 
D)  All of the statements associated with this question are correct, depending on the quantity. 
A)  economies of scale. 
B)  constant returns to scale. 
C)  diseconomies of scale. 
D)  All of the statements associated with this question are correct, depending on the quantity.

A firm has a total cost function of C(Q)= 75 + 25Q^1/2.The firm experiences:

You are the manager of a monopoly that faces a demand curve described by P = 85 − 5Q.Your costs are C = 20 + 5Q.The revenue-maximizing output is:

Which of the following is true under monopoly?

The primary difference between monopolistic competition and perfect competition is:

What is the primary facet of monopolistic competition that does not allow for the presence of long-run profits? If firms are making short-run profits in a monopolistically competitive industry,what will eventually occur that will cause long-run economic profits to be zero?

You are the manager of a monopoly that faces a demand curve described by P = 80 − 5Q.Your costs are C = 10 + 5Q.The revenue-maximizing output is:

In the long run,monopolistically competitive firms produce a level of output such that:

The second-order condition for a firm maximizing its profit operating in a monopolistically competitive market is:

What contributes to the existence of multiproduct firms?

Differentiated goods are a feature of a:

You are the manager of a monopoly that faces a demand curve described by P = 10 − 2Q.Your costs are C = 20 + 2Q.The revenue-maximizing output is:

A perfectly competitive firm faces a:

A monopoly has two production plants with cost functions C₁ = 50 + 0.1Q₁² and C₂ = 30 + 0.05Q₂².The demand it faces is Q = 500 − 10P.What is the profit-maximizing level of output?

In a monopoly where the marginal revenue and price are,respectively,given by $0.50 and $2,the price elasticity of demand is:

You are the manager of a firm that produces output in two plants.The demand for your firm's product is P = 120 − 6Q,where Q = Q₁ + Q₂.The marginal costs associated with producing in the two plants are MC₁ = 2Q₁ and MC₂ = 4Q₂.What price should be charged in order to maximize revenues?

Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets?

A firm has a total cost function of C(Q)= 50 + 10Q^1/2.The firm experiences:

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

Exam 8: Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

A firm has a total cost function of C(Q)= 75 + 25Q1/2.The firm experiences:

You are the manager of a monopoly that faces a demand curve described by P = 85 − 5Q.Your costs are C = 20 + 5Q.The revenue-maximizing output is:

Which of the following is true under monopoly?

The primary difference between monopolistic competition and perfect competition is:

What is the primary facet of monopolistic competition that does not allow for the presence of long-run profits? If firms are making short-run profits in a monopolistically competitive industry,what will eventually occur that will cause long-run economic profits to be zero?

You are the manager of a monopoly that faces a demand curve described by P = 80 − 5Q.Your costs are C = 10 + 5Q.The revenue-maximizing output is:

In the long run,monopolistically competitive firms produce a level of output such that:

The second-order condition for a firm maximizing its profit operating in a monopolistically competitive market is:

What contributes to the existence of multiproduct firms?

Differentiated goods are a feature of a:

You are the manager of a monopoly that faces a demand curve described by P = 10 − 2Q.Your costs are C = 20 + 2Q.The revenue-maximizing output is:

A perfectly competitive firm faces a:

A monopoly has two production plants with cost functions C1 = 50 + 0.1Q12 and C2 = 30 + 0.05Q22.The demand it faces is Q = 500 − 10P.What is the profit-maximizing level of output?

In a monopoly where the marginal revenue and price are,respectively,given by $0.50 and $2,the price elasticity of demand is:

You are the manager of a firm that produces output in two plants.The demand for your firm's product is P = 120 − 6Q,where Q = Q1 + Q2.The marginal costs associated with producing in the two plants are MC1 = 2Q1 and MC2 = 4Q2.What price should be charged in order to maximize revenues?

Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets?

A firm has a total cost function of C(Q)= 50 + 10Q1/2.The firm experiences:

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

A firm has a total cost function of C(Q)= 75 + 25Q^1/2.The firm experiences:

A monopoly has two production plants with cost functions C₁ = 50 + 0.1Q₁² and C₂ = 30 + 0.05Q₂².The demand it faces is Q = 500 − 10P.What is the profit-maximizing level of output?

You are the manager of a firm that produces output in two plants.The demand for your firm's product is P = 120 − 6Q,where Q = Q₁ + Q₂.The marginal costs associated with producing in the two plants are MC₁ = 2Q₁ and MC₂ = 4Q₂.What price should be charged in order to maximize revenues?

A firm has a total cost function of C(Q)= 50 + 10Q^1/2.The firm experiences: