Question 1

The source(s)of monopoly power for a monopoly may be:

Accepted Answer

A)  economies of scale. 
B)  economies of scope. 
C)  patents. 
D)  All of the statements associated with this question are correct. 
A)  economies of scale. 
B)  economies of scope. 
C)  patents. 
D)  All of the statements associated with this question are correct.

Question 2

There is a market supply curve in a:

Accepted Answer

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

Question 3

You are the manager of a firm that sells its product in a competitive market at a price of $50.Your firm's cost function is C = 40 + 5Q2.The profit-maximizing output for your firm is:

Accepted Answer

A)  4/5. 
B)  10. 
C)  5. 
D)  45. 
A)  4/5. 
B)  10. 
C)  5. 
D)  45.

Question 4

Manufacturers of laundry detergent and dishwashing soap reinvest a relatively large percentage of their sales revenues on advertising campaigns.Most of these advertisements that appear on television stress the fact that their product is "New and Improved." Why?

Accepted Answer

The market for many of these products is

Question 5

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 price?

Accepted Answer

A)  $12.5 per unit 
B)  $6.25 per unit 
C)  $31.25 per unit 
D)  $18.75 per unit 
A)  $12.5 per unit 
B)  $6.25 per unit 
C)  $31.25 per unit 
D)  $18.75 per unit

Question 6

Suppose perfectly competitive market conditions are characterized by the following inverse demand and inverse supply functions: P = 100 − 5Q and P = 10 + 5Q.The demand curve facing an individual firm operating in this market is:

Accepted Answer

A)  P = 100 − 5Q. 
B)  a horizontal line at $9. 
C)  a horizontal line at $55. 
D)  P/N = (100 − 5Q)/N, where N is the total number of firms in the competitive market. 
A)  P = 100 − 5Q. 
B)  a horizontal line at $9. 
C)  a horizontal line at $55. 
D)  P/N = (100 − 5Q)/N, where N is the total number of firms in the competitive market.

Question 7

The second-order condition for a monopoly maximizing its profit is:

Accepted Answer

A)  (d2R(Q)/dQ2) − (d2C(Q)/dQ2) 2R(Q)/dQ2) − (d2C(Q)/dQ2) = 0. 
C)  (dMR/dQ) 2R(Q)/dQ2) − (d2C(Q)/dQ2) < 0 or (dMR/dQ) < (dMC/dQ). 
A)  (d2R(Q)/dQ2) − (d2C(Q)/dQ2) 2R(Q)/dQ2) − (d2C(Q)/dQ2) = 0. 
C)  (dMR/dQ) 2R(Q)/dQ2) − (d2C(Q)/dQ2) < 0 or (dMR/dQ) < (dMC/dQ).

Question 8

Clark Industries currently spends 5 percent of its sales on advertising.Suppose that the elasticity of advertising for Clark is 0.25.Determine the optimal profit margin over price (P − MC)/P.

Accepted Answer

A)  15 percent. 
B)  20 percent. 
C)  25 percent. 
D)  None of the preceding answers is correct. 
A)  15 percent. 
B)  20 percent. 
C)  25 percent. 
D)  None of the preceding answers is correct.

Question 9

Which of the following formulas correctly measures the profit of a monopoly?

Accepted Answer

A)  F1F1F1S1F1F1F10 = TR − TC 
B)  F1F1F1S1F1F1F10 = (P − AT
C) Q 
C)  F1F1F1S1F1F1F10 = (P − AV
C) Q 
D)  F1F1F1S1F1F1F10 = TR − TC and F1F1F1S1F1F1F10 = (P − AT
C) Q 
A)  F1F1F1S1F1F1F10 = TR − TC 
B)  F1F1F1S1F1F1F10 = (P − AT
C) Q 
C)  F1F1F1S1F1F1F10 = (P − AV
C) Q 
D)  F1F1F1S1F1F1F10 = TR − TC and F1F1F1S1F1F1F10 = (P − AT
C) Q

Question 10

If a monopolistically competitive firm's marginal cost increases,then in order to maximize profits,the firm will:

Accepted Answer

A)  reduce output and increase price. 
B)  increase output and decrease price. 
C)  increase both output and price. 
D)  reduce both output and price. 
A)  reduce output and increase price. 
B)  increase output and decrease price. 
C)  increase both output and price. 
D)  reduce both output and price.

Question 11

You are the manager of a firm that sells its product in a competitive market at a price of $60.Your firm's cost function is C = 50 + 3Q2.Your firm's maximum profits are:

Accepted Answer

A)  250. 
B)  400. 
C)  450. 
D)  500. 
A)  250. 
B)  400. 
C)  450. 
D)  500.

Question 12

Which of the following is true under monopolistic competition in the short run?

Accepted Answer

A)  Profits are always zero. 
B)  P > MC. 
C)  P = MR. 
D)  All of the choices are true in monopolistic competition. 
A)  Profits are always zero. 
B)  P > MC. 
C)  P = MR. 
D)  All of the choices are true in monopolistic competition.

Question 13

You are a manager in a perfectly competitive market.The price in your market is $14.Your total cost curve is C(Q)= 10 + 4Q + 0.5Q2.What level of profits will you make in the short run?

Accepted Answer

A)  $20 
B)  $40 
C)  $60 
D)  $80 
A)  $20 
B)  $40 
C)  $60 
D)  $80

Question 14

Pic Industries produces plastic toothpicks that it sells to distributors in the Southwest.During the early 1990s,the price of the plastic it uses to produce toothpicks fell by 46 percent,due to a local glut of recycled plastic containers.Assuming that the market for plastic toothpicks most closely resembles that of perfect competition and that other firms in the industry do not experience similar cost savings in the short run,what impact would this have on the profit-maximizing output,price,and profits of Pic Industries?

Accepted Answer

Other things equal,the fall in the price

Question 15

Would you expect an industry to be monopolistically competitive if consumers did not value variety in the market?

Accepted Answer

If consumers did not value variety in th

Question 16

You are the manager of a firm that produces output in two plants.The demand for your firm's product is P = 20 − Q,where Q = Q1 + Q2.The marginal costs associated with producing in the two plants are MC1 = 2 and MC2 = 2Q2.What is the profit-maximizing price that the firm should charge?

Accepted Answer

A)  $8 
B)  $9 
C)  $11 
D)  $12 
A)  $8 
B)  $9 
C)  $11 
D)  $12

Question 17

U.S.Airways experienced huge losses for several years in the 1990s,yet it continued to operate its fleets.Why didn't U.S.Airways shut down its operations to avoid the losses?

Accepted Answer

It was covering its variable costs (the

Question 18

A linear demand function exhibits:

Accepted Answer

A)  constant demand elasticity. 
B)  more elastic demand as output increases. 
C)  less elastic demand as output increases. 
D)  insufficient information to determine. 
A)  constant demand elasticity. 
B)  more elastic demand as output increases. 
C)  less elastic demand as output increases. 
D)  insufficient information to determine.

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)  Prices are equal to marginal costs in the long run. 
C)  Long-run profits are zero. 
D)  Prices are above marginal costs in the long run. 
A)  Firms produce homogeneous goods. 
B)  Prices are equal to marginal costs in the long run. 
C)  Long-run profits are zero. 
D)  Prices are above marginal costs in the long run.

Question 20

You are the manager of a monopoly that faces a demand curve described by P = 63 − 5Q.Your costs are C = 10 + 3Q.The profit-maximizing price is:

Accepted Answer

A)  20. 
B)  27. 
C)  33. 
D)  55. 
A)  20. 
B)  27. 
C)  33. 
D)  55.

The source(s)of monopoly power for a monopoly may be:

There is a market supply curve in a:

You are the manager of a firm that sells its product in a competitive market at a price of $50.Your firm's cost function is C = 40 + 5Q².The profit-maximizing output for your firm is:

Manufacturers of laundry detergent and dishwashing soap reinvest a relatively large percentage of their sales revenues on advertising campaigns.Most of these advertisements that appear on television stress the fact that their product is "New and Improved." Why?

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 price?

Suppose perfectly competitive market conditions are characterized by the following inverse demand and inverse supply functions: P = 100 − 5Q and P = 10 + 5Q.The demand curve facing an individual firm operating in this market is:

The second-order condition for a monopoly maximizing its profit is:

Clark Industries currently spends 5 percent of its sales on advertising.Suppose that the elasticity of advertising for Clark is 0.25.Determine the optimal profit margin over price (P − MC)/P.

Which of the following formulas correctly measures the profit of a monopoly?

If a monopolistically competitive firm's marginal cost increases,then in order to maximize profits,the firm will:

You are the manager of a firm that sells its product in a competitive market at a price of $60.Your firm's cost function is C = 50 + 3Q².Your firm's maximum profits are:

Which of the following is true under monopolistic competition in the short run?

You are a manager in a perfectly competitive market.The price in your market is $14.Your total cost curve is C(Q)= 10 + 4Q + 0.5Q².What level of profits will you make in the short run?

Would you expect an industry to be monopolistically competitive if consumers did not value variety in the market?

You are the manager of a firm that produces output in two plants.The demand for your firm's product is P = 20 − Q,where Q = Q₁ + Q₂.The marginal costs associated with producing in the two plants are MC₁ = 2 and MC₂ = 2Q₂.What is the profit-maximizing price that the firm should charge?

U.S.Airways experienced huge losses for several years in the 1990s,yet it continued to operate its fleets.Why didn't U.S.Airways shut down its operations to avoid the losses?

A linear demand function exhibits:

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

You are the manager of a monopoly that faces a demand curve described by P = 63 − 5Q.Your costs are C = 10 + 3Q.The profit-maximizing price is:

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

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

The source(s)of monopoly power for a monopoly may be:

There is a market supply curve in a:

You are the manager of a firm that sells its product in a competitive market at a price of $50.Your firm's cost function is C = 40 + 5Q2.The profit-maximizing output for your firm is:

Manufacturers of laundry detergent and dishwashing soap reinvest a relatively large percentage of their sales revenues on advertising campaigns.Most of these advertisements that appear on television stress the fact that their product is "New and Improved." Why?

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 price?

Suppose perfectly competitive market conditions are characterized by the following inverse demand and inverse supply functions: P = 100 − 5Q and P = 10 + 5Q.The demand curve facing an individual firm operating in this market is:

The second-order condition for a monopoly maximizing its profit is:

Clark Industries currently spends 5 percent of its sales on advertising.Suppose that the elasticity of advertising for Clark is 0.25.Determine the optimal profit margin over price (P − MC)/P.

Which of the following formulas correctly measures the profit of a monopoly?

If a monopolistically competitive firm's marginal cost increases,then in order to maximize profits,the firm will:

You are the manager of a firm that sells its product in a competitive market at a price of $60.Your firm's cost function is C = 50 + 3Q2.Your firm's maximum profits are:

Which of the following is true under monopolistic competition in the short run?

You are a manager in a perfectly competitive market.The price in your market is $14.Your total cost curve is C(Q)= 10 + 4Q + 0.5Q2.What level of profits will you make in the short run?

Would you expect an industry to be monopolistically competitive if consumers did not value variety in the market?

You are the manager of a firm that produces output in two plants.The demand for your firm's product is P = 20 − Q,where Q = Q1 + Q2.The marginal costs associated with producing in the two plants are MC1 = 2 and MC2 = 2Q2.What is the profit-maximizing price that the firm should charge?

U.S.Airways experienced huge losses for several years in the 1990s,yet it continued to operate its fleets.Why didn't U.S.Airways shut down its operations to avoid the losses?

A linear demand function exhibits:

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

You are the manager of a monopoly that faces a demand curve described by P = 63 − 5Q.Your costs are C = 10 + 3Q.The profit-maximizing price is:

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

You are the manager of a firm that sells its product in a competitive market at a price of $50.Your firm's cost function is C = 40 + 5Q².The profit-maximizing output for your firm is:

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 price?

You are the manager of a firm that sells its product in a competitive market at a price of $60.Your firm's cost function is C = 50 + 3Q².Your firm's maximum profits are:

You are a manager in a perfectly competitive market.The price in your market is $14.Your total cost curve is C(Q)= 10 + 4Q + 0.5Q².What level of profits will you make in the short run?

You are the manager of a firm that produces output in two plants.The demand for your firm's product is P = 20 − Q,where Q = Q₁ + Q₂.The marginal costs associated with producing in the two plants are MC₁ = 2 and MC₂ = 2Q₂.What is the profit-maximizing price that the firm should charge?