Question 1

If the demand elasticity for the monopolist's product is equal to -2 and marginal revenue is 10,
What is the profit-maximizing price?

Accepted Answer

A) $20 
B) $10 
C) $0.50 
D) $5 
A) $20 
B) $10 
C) $0.50 
D) $5

Question 2

Which of the following statements correctly identifies the relationship between marginal revenue and price elasticity of demand?

Accepted Answer

A) When price elasticity of demand is infinite,marginal revenue is greater than price. 
B) When price elasticity of demand is equal to one,marginal revenue is zero. 
C) When price elasticity of demand is more than one,marginal revenue is negative. 
D) When price elasticity of demand is less than one,marginal revenue is positive. 
A) When price elasticity of demand is infinite,marginal revenue is greater than price. 
B) When price elasticity of demand is equal to one,marginal revenue is zero. 
C) When price elasticity of demand is more than one,marginal revenue is negative. 
D) When price elasticity of demand is less than one,marginal revenue is positive.

Question 3

At an output of 1,000 units,a monopoly firm's average revenue is $40,its marginal revenue is $30,its marginal cost is $30,its average variable cost is $35,and fixed costs are $5,000.Given this information,we can conclude that the monopolist:

Accepted Answer

A) is earning zero economic profit. 
B) is earning an economic profit equal to $5,000. 
C) is making an economic loss and should shut down. 
D) should increase output to maximize profit. 
A) is earning zero economic profit. 
B) is earning an economic profit equal to $5,000. 
C) is making an economic loss and should shut down. 
D) should increase output to maximize profit.

Question 4

The following table shows the total revenue and total cost for a monopolist at various levels of output.
 
What is the marginal revenue associated with the sale of the fifth unit in Table 11-2?

Accepted Answer

A) $2 
B) -$2 
C) $10 
D) -$10 
A) $2 
B) -$2 
C) $10 
D) -$10

Question 5

A company is granted a patent on automobile technology which,when fitted in a car,will park the car into a parking spot automatically.
a)Assume that demand for this automatic parking technology is positive and show the equilibrium price and quantity in the market.
b)How will equilibrium price and quantity change when the patent expires in 17 years?

Accepted Answer

a)A patent forms a regulatory barrier to

Question 6

Use the following figure to answer the question : Figure 11-6 : shows the profit-maximizing output of a monopolist who faces constant average and marginal costs.  
-Refer to Figure 11-6.When the firm operates as a profit-maximizing monopolist as compared to a perfectly competitive firm,producer surplus changes by _____.

Accepted Answer

A) -ABC 
B) P''ABP 
C) -AFBG 
D) P''ACP 
A) -ABC 
B) P''ABP 
C) -AFBG 
D) P''ACP

Question 7

The smaller the value of the Lerner index,_____.

Accepted Answer

A) the greater the firm's monopoly power 
B) the more price elastic the firm's supply curve 
C) the greater the difference between marginal cost and marginal revenue 
D) the smaller the difference between marginal cost and price 
A) the greater the firm's monopoly power 
B) the more price elastic the firm's supply curve 
C) the greater the difference between marginal cost and marginal revenue 
D) the smaller the difference between marginal cost and price

Question 8

Magic Cigarette Company produces packs of cigarettes at a marginal cost of $2 per pack.If they currently sell their product at $5 per pack,what is the value of the Lerner index of monopoly power?

Accepted Answer

A) 0.4 
B) 0.6 
C) 2.5 
D) 5 
A) 0.4 
B) 0.6 
C) 2.5 
D) 5

Question 9

A monopolist faces the following conditions: Q = 500 - .5P and TC = 1000 + Q + Q2.What is the monopolist's profit maximizing price?

Accepted Answer

A) P = $650 
B) P = $667 
C) P = $675 
D) P = $688 
A) P = $650 
B) P = $667 
C) P = $675 
D) P = $688

Question 10

Use the following figure to answer the question : Figure 11-6 : shows the profit-maximizing output of a monopolist who faces constant average and marginal costs.  
-Refer to Figure 11-6.If the firm were operating in a perfectly competitive market,the equilibrium quantity would be _____.

Accepted Answer

A) OH 
B) OQ'' 
C) OQ 
D) OQ' 
A) OH 
B) OQ'' 
C) OQ 
D) OQ'

Question 11

Which of the following does not constitute a barrier to entry into a market?

Accepted Answer

A) Homogenous product 
B) Economies of scale 
C) Control of a natural resource 
D) Natural monopoly 
A) Homogenous product 
B) Economies of scale 
C) Control of a natural resource 
D) Natural monopoly

Question 12

The following figure shows the marginal cost [MC],average cost [AC],marginal revenue [MR],and demand curves for a profit-maximizing monopolist.  
Refer to Figure 11-2.The quantity of output produced by the monopolist is _____.

Accepted Answer

A) OC 
B) OE 
C) OJ 
D) OK 
A) OC 
B) OE 
C) OJ 
D) OK

Question 13

Which of the following would take place if a competitive firm acquired monopoly power in the market through economies of scale and became a natural monopoly?

Accepted Answer

A) Producer surplus will increase and consumer surplus will fall 
B) Consumer surplus will be transferred to producers resulting in a deadweight loss 
C) Consumer surplus will fall but will not affect producer surplus 
D) A deadweight loss will arise in the market equal to the fall in producer surplus 
A) Producer surplus will increase and consumer surplus will fall 
B) Consumer surplus will be transferred to producers resulting in a deadweight loss 
C) Consumer surplus will fall but will not affect producer surplus 
D) A deadweight loss will arise in the market equal to the fall in producer surplus

Question 14

The larger the value of the Lerner index for a firm,_____.

Accepted Answer

A) the greater the difference between marginal cost and marginal revenue 
B) the smaller the difference between marginal cost and price 
C) the more price elastic the firm's demand curve 
D) the greater the firm's monopoly power 
A) the greater the difference between marginal cost and marginal revenue 
B) the smaller the difference between marginal cost and price 
C) the more price elastic the firm's demand curve 
D) the greater the firm's monopoly power

Question 15

Use the following figure to answer the question : Figure 11-5 : shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF.  
-Refer to Figure 11-5.A fall in price will decrease total revenue _____.

Accepted Answer

A) between the points E and F 
B) between the points E and A 
C) between the points A and F 
D) at point G 
A) between the points E and F 
B) between the points E and A 
C) between the points A and F 
D) at point G

Question 16

A monopoly firm will maximize profits by producing the level of output where:

Accepted Answer

A) total cost is equal to total revenue. 
B) total revenue is at its maximum. 
C) the difference between marginal revenue and average revenue is maximized. 
D) the difference between total cost and total revenue is maximized. 
A) total cost is equal to total revenue. 
B) total revenue is at its maximum. 
C) the difference between marginal revenue and average revenue is maximized. 
D) the difference between total cost and total revenue is maximized.

Question 17

Use the following figure to answer the question : Figure 11-5 : shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF.  
-Refer to Figure 11-5.A fall in price will keep total revenue unchanged _____.

Accepted Answer

A) between the points E and F 
B) between the points E and A 
C) between the points A and F 
D) at point A 
A) between the points E and F 
B) between the points E and A 
C) between the points A and F 
D) at point A

Question 18

Which of the following conditions generally holds when a monopoly firm is producing its profit-maximizing level of output?

Accepted Answer

A) Marginal cost [MC] = marginal revenue [MR] = average cost [AC] = average revenue [AR] B) MC = MR > AC C) MC = MR = price D) MC = MR < AR A) Marginal cost [MC] = marginal revenue [MR] = average cost [AC] = average revenue [AR] B) MC = MR > AC C) MC = MR = price D) MC = MR < AR

Question 19

If P = price and MC = marginal cost,the price markup of a monopolist is expressed as _____.

Accepted Answer

A) (P - Mc./MC 
B) (P - Mc./P 
C) (MC - P)/MC 
D) (MC - P)/P 
A) (P - Mc./MC 
B) (P - Mc./P 
C) (MC - P)/MC 
D) (MC - P)/P

Question 20

Use the following figure to answer the question : Figure 11-6 : shows the profit-maximizing output of a monopolist who faces constant average and marginal costs.  
-Refer to Figure 11-6.When the firm operates as a profit-maximizing monopolist as compared to a perfectly competitive firm,consumer surplus changes by _____.

Accepted Answer

A) -ABC 
B) AFBG 
C) -P''ACP 
D) P''ABP 
A) -ABC 
B) AFBG 
C) -P''ACP 
D) P''ABP

If the demand elasticity for the monopolist's product is equal to -2 and marginal revenue is 10, What is the profit-maximizing price?

Which of the following statements correctly identifies the relationship between marginal revenue and price elasticity of demand?

At an output of 1,000 units,a monopoly firm's average revenue is $40,its marginal revenue is $30,its marginal cost is $30,its average variable cost is $35,and fixed costs are $5,000.Given this information,we can conclude that the monopolist:

The following table shows the total revenue and total cost for a monopolist at various levels of output. What is the marginal revenue associated with the sale of the fifth unit in Table 11-2?

The smaller the value of the Lerner index,_____.

Magic Cigarette Company produces packs of cigarettes at a marginal cost of $2 per pack.If they currently sell their product at $5 per pack,what is the value of the Lerner index of monopoly power?

A monopolist faces the following conditions: Q = 500 - .5P and TC = 1000 + Q + Q².What is the monopolist's profit maximizing price?

Use the following figure to answer the question : Figure 11-6 : shows the profit-maximizing output of a monopolist who faces constant average and marginal costs. -Refer to Figure 11-6.If the firm were operating in a perfectly competitive market,the equilibrium quantity would be _____.

Which of the following does not constitute a barrier to entry into a market?

The following figure shows the marginal cost [MC],average cost [AC],marginal revenue [MR],and demand curves for a profit-maximizing monopolist. Refer to Figure 11-2.The quantity of output produced by the monopolist is _____.

Which of the following would take place if a competitive firm acquired monopoly power in the market through economies of scale and became a natural monopoly?

The larger the value of the Lerner index for a firm,_____.

Use the following figure to answer the question : Figure 11-5 : shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF. -Refer to Figure 11-5.A fall in price will decrease total revenue _____.

A monopoly firm will maximize profits by producing the level of output where:

Use the following figure to answer the question : Figure 11-5 : shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF. -Refer to Figure 11-5.A fall in price will keep total revenue unchanged _____.

Which of the following conditions generally holds when a monopoly firm is producing its profit-maximizing level of output?

If P = price and MC = marginal cost,the price markup of a monopolist is expressed as _____.

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 11: Monopoly

If the demand elasticity for the monopolist's product is equal to -2 and marginal revenue is 10, What is the profit-maximizing price?

Which of the following statements correctly identifies the relationship between marginal revenue and price elasticity of demand?

At an output of 1,000 units,a monopoly firm's average revenue is $40,its marginal revenue is $30,its marginal cost is $30,its average variable cost is $35,and fixed costs are $5,000.Given this information,we can conclude that the monopolist:

The following table shows the total revenue and total cost for a monopolist at various levels of output. What is the marginal revenue associated with the sale of the fifth unit in Table 11-2?

The smaller the value of the Lerner index,_____.

Magic Cigarette Company produces packs of cigarettes at a marginal cost of $2 per pack.If they currently sell their product at $5 per pack,what is the value of the Lerner index of monopoly power?

A monopolist faces the following conditions: Q = 500 - .5P and TC = 1000 + Q + Q2.What is the monopolist's profit maximizing price?

Use the following figure to answer the question : Figure 11-6 : shows the profit-maximizing output of a monopolist who faces constant average and marginal costs. -Refer to Figure 11-6.If the firm were operating in a perfectly competitive market,the equilibrium quantity would be _____.

Which of the following does not constitute a barrier to entry into a market?

The following figure shows the marginal cost [MC],average cost [AC],marginal revenue [MR],and demand curves for a profit-maximizing monopolist. Refer to Figure 11-2.The quantity of output produced by the monopolist is _____.

Which of the following would take place if a competitive firm acquired monopoly power in the market through economies of scale and became a natural monopoly?

The larger the value of the Lerner index for a firm,_____.

Use the following figure to answer the question : Figure 11-5 : shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF. -Refer to Figure 11-5.A fall in price will decrease total revenue _____.

A monopoly firm will maximize profits by producing the level of output where:

Use the following figure to answer the question : Figure 11-5 : shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF. -Refer to Figure 11-5.A fall in price will keep total revenue unchanged _____.

Which of the following conditions generally holds when a monopoly firm is producing its profit-maximizing level of output?

If P = price and MC = marginal cost,the price markup of a monopolist is expressed as _____.

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

A monopolist faces the following conditions: Q = 500 - .5P and TC = 1000 + Q + Q².What is the monopolist's profit maximizing price?