Question 1

A monopolist faces the demand function Q =7,000/(p +3) - 2.If she charges a price of p,her marginal revenue will be

Accepted Answer

A)  p/2 + 3. 
B)  2p + 1.50. 
C)  p/2 - 3/2. 
D)  -2(p + 3) - 3. 
E)  (p+
B)  - 2. 
A)  p/2 + 3. 
B)  2p + 1.50. 
C)  p/2 - 3/2. 
D)  -2(p + 3) - 3. 
E)  (p+
B)  - 2. C

Question 2

The demand for Professor Bongmore's new book is given by the function Q =2,000 -100p.If the cost of having the book typeset is $7,000,if the marginal cost of printing an extra copy is $4,and if he has no other costs,then he would maximize his profits by

Accepted Answer

A)  having it typeset and selling 800 copies. 
B)  having it typeset and selling 1,000 copies. 
C)  not having it typeset and not selling any copies. 
D)  having it typeset and selling 1,600 copies. 
E)  having it typeset and selling 400 copies. 
A)  having it typeset and selling 800 copies. 
B)  having it typeset and selling 1,000 copies. 
C)  not having it typeset and not selling any copies. 
D)  having it typeset and selling 1,600 copies. 
E)  having it typeset and selling 400 copies. C

Question 3

The demand for a monopolist's output is 6,000/(p + 3)2,where p is its price.It has constant marginal costs equal to $6 per unit.What price will it charge to maximize its profits?

Accepted Answer

A)  $9 
B)  $18 
C)  $21 
D)  $15 
E)  $6 
A)  $9 
B)  $18 
C)  $21 
D)  $15 
E)  $6 D

Question 4

Since a monopoly makes excess profits beyond the normal rate of return on investment,an investor is likely to get a higher rate of return in the stock market by investing in monopolistic rather than in competitive industries.

Accepted Answer

A) True 
 B)False

Question 5

A monopolist has the total cost function c(q)=750 + 5q.The inverse demand function is 140 - 7q,where prices and costs are measured in dollars.If the firm is required by law to meet demand at a price equal to its marginal costs,

Accepted Answer

A)  the firm will make positive profit but not as much profit as it would make if it were allowed to choose its own price. 
B)  the firm's profits will be zero. 
C)  the firm will lose $375. 
D)  the firm will lose $750. 
E)  the firm will lose $450. 
A)  the firm will make positive profit but not as much profit as it would make if it were allowed to choose its own price. 
B)  the firm's profits will be zero. 
C)  the firm will lose $375. 
D)  the firm will lose $750. 
E)  the firm will lose $450.

Question 6

A major software developer has estimated the demand for its new personal finance software package to be Q =1,000,000P - 1.40 while the total cost of the package is C = 100,000 + 20Q.If this firm wishes to maximize profit,what percentage markup should it place on this product?

Accepted Answer

A)  220% 
B)  290% 
C)  250% 
D)  190% 
E)  300% 
A)  220% 
B)  290% 
C)  250% 
D)  190% 
E)  300%

Question 7

The demand for a monopolist's output is 3,000/(p + 2)2,where p is the price it charges.At a price of $3,the elasticity of demand for the monopolist's output is

Accepted Answer

A)  -1. 
B)  -2.60. 
C)  -2.10. 
D)  -1.60. 
E)  -1.10. 
A)  -1. 
B)  -2.60. 
C)  -2.10. 
D)  -1.60. 
E)  -1.10.

Question 8

A profit-maximizing monopolist has the cost schedule c(y)= 40y.The demand for her product is given by y = 600/p4,where p is her price.Suppose that the government tries to get her to increase her output by giving her a subsidy of $21 for every unit that she sells.Giving her the subsidy would make her

Accepted Answer

A)  decrease her price by $49. 
B)  decrease her price by $28. 
C)  decrease her price by $10.50. 
D)  decrease her price by $21. 
E)  leave her price unchanged. 
A)  decrease her price by $49. 
B)  decrease her price by $28. 
C)  decrease her price by $10.50. 
D)  decrease her price by $21. 
E)  leave her price unchanged.

Question 9

A monopolist will always equate marginal revenue and marginal cost when maximizing profit.

Accepted Answer

A) True 
 B)False

Question 10

A profit-maximizing monopoly faces an inverse demand function described by the equation p(y)=30 - y and its total costs are c(y)=5y,where prices and costs are measured in dollars.In the past it was not taxed,but now it must pay a tax of 2 dollars per unit of output.After the tax,the monopoly will

Accepted Answer

A)  increase its price by 3 dollars. 
B)  increase its price by 2 dollars. 
C)  increase its price by 1 dollars. 
D)  leave its price constant. 
E)  None of the above. 
A)  increase its price by 3 dollars. 
B)  increase its price by 2 dollars. 
C)  increase its price by 1 dollars. 
D)  leave its price constant. 
E)  None of the above.

Question 11

A firm has invented a new beverage called Slops.It doesn't taste very good,but it gives people a craving for Lawrence Welk's music and Professor Johnson's jokes.Some people are willing to pay money for this effect,so the demand for Slops is given by the equation q=14 - p.Slops can be made at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater.But before any Slops can be produced,the firm must undertake a fixed cost of $54.Since the inventor has a patent on Slops,it can be a monopolist in this new industry.

Accepted Answer

A)  The firm will produce 7 units of Slops. 
B)  A Pareto improvement could be achieved by having the government pay the firm a subsidy of $59 and insisting that the firm offer Slops at zero price. 
C)  From the point of view of social efficiency,it is best that no Slops be produced. 
D)  The firm will produce 14 units of Slops. 
E)  None of the above. 
A)  The firm will produce 7 units of Slops. 
B)  A Pareto improvement could be achieved by having the government pay the firm a subsidy of $59 and insisting that the firm offer Slops at zero price. 
C)  From the point of view of social efficiency,it is best that no Slops be produced. 
D)  The firm will produce 14 units of Slops. 
E)  None of the above.

Question 12

A firm has discovered a new kind of nonfattening,non-habit-forming dessert called zwiffle.It doesn't taste very good,but some people like it and it can be produced from old newspapers at zero marginal cost.Before any zwiffle could be produced,the firm would have to spend a fixed cost of $F.Demand for zwiffle is given by the equation q = 20 - p.The firm has a patent on zwiffle,so it can have a monopoly in this market.

Accepted Answer

A)  The firm will not produce zwiffle if F $\gt$ 20. 
B)  The firm will produce zwiffle only if F is less than or equal to 100. 
C)  The firm will produce 15 units of zwiffle. 
D)  The firm will produce 20 units of zwiffle. 
E)  None of the above. 
A)  The firm will not produce zwiffle if F $\gt$ 20. 
B)  The firm will produce zwiffle only if F is less than or equal to 100. 
C)  The firm will produce 15 units of zwiffle. 
D)  The firm will produce 20 units of zwiffle. 
E)  None of the above.

Question 13

A profit-maximizing monopoly faces an inverse demand function described by the equation p(y)- 40 - y and its total costs are c(y)= 7y,where prices and costs are measured in dollars.In the past it was not taxed,but now it must pay a tax of 6 dollars per unit of output.After the tax,the monopoly will

Accepted Answer

A)  increase its price by 6 dollars. 
B)  increase its price by 9 dollars. 
C)  increase its price by 3 dollars. 
D)  leave its price constant. 
E)  None of the above. 
A)  increase its price by 6 dollars. 
B)  increase its price by 9 dollars. 
C)  increase its price by 3 dollars. 
D)  leave its price constant. 
E)  None of the above.

Question 14

A monopolist faces a downward-sloping demand curve and has fixed costs so large that when she maximizes profits with a positive amount of output,she earns exactly zero profits.At this positive,profit-maximizing output,

Accepted Answer

A)  there are decreasing returns to scale. 
B)  demand is price inelastic. 
C)  marginal revenue is greater than marginal cost. 
D)  price equals marginal cost. 
E)  average total cost is greater than marginal cost. 
A)  there are decreasing returns to scale. 
B)  demand is price inelastic. 
C)  marginal revenue is greater than marginal cost. 
D)  price equals marginal cost. 
E)  average total cost is greater than marginal cost.

Question 15

A monopolist faces the demand curve q =90 -p/2,where q is the number of units sold and p is the price in dollars.She has quasi-fixed costs,C,and constant marginal costs of $20 per unit of output.Therefore her total costs are C + 20q if q $\gt$ 0 and 0 if q = 0.What is the largest value of C for which she would be willing to produce positive output?

Accepted Answer

A)  $20 
B)  $2,560 
C)  $3,200 
D)  $4,800 
E)  $3,840 
A)  $20 
B)  $2,560 
C)  $3,200 
D)  $4,800 
E)  $3,840

Question 16

A profit-maximizing monopolist faces a demand function given by q =1000 -20p,where p is the price of her output in dollars.She has a constant marginal cost of 20 dollars per unit of output.In an effort to induce her to increase her output,the government agrees to pay her a subsidy of $10 for every unit that she produces.She will

Accepted Answer

A)  increase her price and lower her output. 
B)  decrease her price by $5 per unit. 
C)  decrease her price by $10 per unit. 
D)  decrease her price by more than $10 per unit but by less than $16 per unit. 
E)  decrease her price by more than $16 per unit. 
A)  increase her price and lower her output. 
B)  decrease her price by $5 per unit. 
C)  decrease her price by $10 per unit. 
D)  decrease her price by more than $10 per unit but by less than $16 per unit. 
E)  decrease her price by more than $16 per unit.

Question 17

The demand for Professor Bongmore's new book is given by the function Q =5,000 - 100p.If the cost of having the book typeset is $9,000,if the marginal cost of printing an extra copy is $4,and if he has no other costs,then he would maximize his profits by

Accepted Answer

A)  not having it typeset and not selling any copies. 
B)  having it typeset and selling 2,500 copies. 
C)  having it typeset and selling 4,600 copies. 
D)  having it typeset and selling 2,300 copies. 
E)  having it typeset and selling 1,150 copies. 
A)  not having it typeset and not selling any copies. 
B)  having it typeset and selling 2,500 copies. 
C)  having it typeset and selling 4,600 copies. 
D)  having it typeset and selling 2,300 copies. 
E)  having it typeset and selling 1,150 copies.

Question 18

A computer software firm has developed a new and better spreadsheet program.The program is protected by copyrights,so the firm can act as a monopolist for this product.The demand function for the spreadsheet is q = 50,000-100p.Any single consumer will want only one copy.The marginal cost of producing and distributing another copy and its documentation is just $10 per copy.If the company sells this software at the profit-maximizing monopoly price,the number of consumers who would not buy the software at the monopoly price but would be willing to pay at least the marginal cost is

Accepted Answer

A)  50,000. 
B)  12,000. 
C)  14,000. 
D)  25,000. 
E)  None of the above. 
A)  50,000. 
B)  12,000. 
C)  14,000. 
D)  25,000. 
E)  None of the above.

Question 19

A monopolist faces the demand curve q=90 - p/2,where q is the number of units sold and p is the price in dollars.He has quasi-fixed costs,C,and constant marginal costs of $20 per unit of output.Therefore his total costs are C+20q if q $\gt$ 0 and 0 if q = 0.What is the largest value of C for which he would be willing to produce positive output?

Accepted Answer

A)  $3,200 
B)  $2,560 
C)  $4,800 
D)  $20 
E)  $3,840 
A)  $3,200 
B)  $2,560 
C)  $4,800 
D)  $20 
E)  $3,840

Question 20

Peter Morgan sells pigeon pies from his pushcart in Central Park.Due to the abundant supplies of raw materials,his costs are zero.The demand schedule for his pigeon pies is p(y)= 80 - y/4.What level of output will maximize Peter's profits?

Accepted Answer

A)  164 
B)  480 
C)  32 
D)  320 
E)  None of the above 
A)  164 
B)  480 
C)  32 
D)  320 
E)  None of the above

Exam 25:Monopoly-Part A

A monopolist faces the demand function Q =7,000/(p +3) - 2.If she charges a price of p,her marginal revenue will be

The demand for Professor Bongmore's new book is given by the function Q =2,000 -100p.If the cost of having the book typeset is $7,000,if the marginal cost of printing an extra copy is $4,and if he has no other costs,then he would maximize his profits by

The demand for a monopolist's output is 6,000/(p + 3)2,where p is its price.It has constant marginal costs equal to $6 per unit.What price will it charge to maximize its profits?

Since a monopoly makes excess profits beyond the normal rate of return on investment,an investor is likely to get a higher rate of return in the stock market by investing in monopolistic rather than in competitive industries.

A monopolist has the total cost function c(q)=750 + 5q.The inverse demand function is 140 - 7q,where prices and costs are measured in dollars.If the firm is required by law to meet demand at a price equal to its marginal costs,

A major software developer has estimated the demand for its new personal finance software package to be Q =1,000,000P - 1.40 while the total cost of the package is C = 100,000 + 20Q.If this firm wishes to maximize profit,what percentage markup should it place on this product?

The demand for a monopolist's output is 3,000/(p + 2)2,where p is the price it charges.At a price of $3,the elasticity of demand for the monopolist's output is

A monopolist will always equate marginal revenue and marginal cost when maximizing profit.

A profit-maximizing monopoly faces an inverse demand function described by the equation p(y)=30 - y and its total costs are c(y)=5y,where prices and costs are measured in dollars.In the past it was not taxed,but now it must pay a tax of 2 dollars per unit of output.After the tax,the monopoly will

A profit-maximizing monopoly faces an inverse demand function described by the equation p(y)- 40 - y and its total costs are c(y)= 7y,where prices and costs are measured in dollars.In the past it was not taxed,but now it must pay a tax of 6 dollars per unit of output.After the tax,the monopoly will

A monopolist faces a downward-sloping demand curve and has fixed costs so large that when she maximizes profits with a positive amount of output,she earns exactly zero profits.At this positive,profit-maximizing output,

The demand for Professor Bongmore's new book is given by the function Q =5,000 - 100p.If the cost of having the book typeset is $9,000,if the marginal cost of printing an extra copy is $4,and if he has no other costs,then he would maximize his profits by

Peter Morgan sells pigeon pies from his pushcart in Central Park.Due to the abundant supplies of raw materials,his costs are zero.The demand schedule for his pigeon pies is p(y)= 80 - y/4.What level of output will maximize Peter's profits?

Demand-Part A

Revealed Preference-Part A

Revealed Preference-Part B

Slutsky Equation-Part A

Slutsky Equation-Part B

Buying and Selling-Part A

Buying and Selling-Part B

Intertemporal Choice-Part A

Intertemporal Choice-Part B

Asset Markets-Part A

Asset Markets-Part B

Uncertainty-Part A

Uncertainty-Part B

Risky Assets-Part A

Risky Assets-Part B

Consumers Surplus-Part A

Consumers Surplus-Part B

Market Demand-Part A

Market Demand-Part B

Equilibrium-Part A

Equilibrium-Part B

Auctions-Part A

Auctions-Part B

Technology-Part A

Technology-Part B

Profit Maximization-Part A

Profit Maximization-Part B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part A

Cost Curves-Part B

Firm Supply-Part A

Firm Supply-Part B

Industry Supply-Part A

Industry Supply-Part B

Monopoly-Part B

Monopoly Behavior-Part A

Monopoly Behavior-Part B

Factor Markets-Part A

Factor Markets-Part B

Oligopoly-Part A

Oligopoly-Part B

Game Theory-Part A

Game Theory-Part B

Game Applications-Part A

Game Applications-Part B

Behavioral Economics-Part A

Exchange-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part A

Welfare-Part B

Externalities-Part A

Externalities-Part B

Information Technology-Part A

Information Technology-Part B

Public Goods-Part A

Public Goods-Part B

Asymmetric Information-Part A

Asymmetric Information-Part B

Filters

A monopolist faces the demand function Q =7,000/(p +3) ^- ².If she charges a price of p,her marginal revenue will be

The demand for a monopolist's output is 6,000/(p + 3)²,where p is its price.It has constant marginal costs equal to $6 per unit.What price will it charge to maximize its profits?

A major software developer has estimated the demand for its new personal finance software package to be Q =1,000,000P ^- ^1.40 while the total cost of the package is C = 100,000 + 20Q.If this firm wishes to maximize profit,what percentage markup should it place on this product?

The demand for a monopolist's output is 3,000/(p + 2)²,where p is the price it charges.At a price of $3,the elasticity of demand for the monopolist's output is