Question 1

You are the manager of a firm that has an exclusive license to produce your product.The inverse market demand curve is P = 900 - 1.5Q.Your cost function is C(Q)= 2Q + Q².Determine the output you should produce,the price you should charge,and your profits.

Accepted Answer

The answer of You are the manager of a firm...

Question 2

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

Accepted Answer

A)  P − (dC(Q)/dQ) = 0. 
B)  (dR(Q)/dQ) − (dC(Q)/dQ) = 0. 
C)  (dR(Q)/dQ) − (dC(Q)/dQ) 2R(Q)/dQ2) − (d2C(Q)/dQ2) < 0.

Question 3

You are the manager of a monopoly that faces a demand curve described by P = 63 − 5Q.Your costs are C = 10 + 3Q.Your firm's maximum profits are:

Accepted Answer

A)  0. 
B)  66. 
C)  120. 
D)  170.

Question 4

Monsanto,the maker of Nutrasweet,owned the patent to aspartame,the official name of the sweetener.In 1987 Monsanto's patent expired in Europe,allowing other firms to produce aspartame under other brand names.What impact do you think this had on the market for aspartame and Monsanto's profits?

Accepted Answer

The answer of Monsanto,the maker of Nutrasweet,owned the patent to...

Question 5

Economies of scale exist whenever:

Accepted Answer

A)  average total costs decline as output increases. 
B)  average total costs increase as output increases. 
C)  average total costs are stationary as output increases. 
D)  average total costs increase as output increases and average total costs are stationary as output increases.

Question 6

A monopoly has two production plants with cost functions C1 = 40 + 0.2Q12 and C2 = 50 + 0.1Q22.The demand it faces is Q = 480 − 5P.What is the profit-maximizing price?

Accepted Answer

A)  $40 per unit 
B)  $45 per unit 
C)  $50 per unit 
D)  $60 per unit

Question 7

If a monopolist has an own price demand elasticity of −.8,is it maximizing profits?

Accepted Answer

The answer of If a monopolist has an own price...

Question 8

You are the manager of a monopolistically competitive firm.The present demand curve you face is P = 100 - 4Q.Your cost function is C(Q)= 50 + 8.5Q². a.What level of output should you choose to maximize profits? b.What price should you charge? c.What will happen in your market in the long run?

Accepted Answer

The answer of You are the manager of a monopolistically...

Question 9

You are the manager of a monopoly firm with (inverse)demand given by P = 50 − 0.5Q.Your firm's cost function is C = 40 + 5Q2.Your firm's marginal revenue is:

Accepted Answer

A)  P = 50 − 0.5Q. 
B)  P = 100 − Q. 
C)  P = 50 − Q. 
D)  There is insufficient information to determine the firm's marginal revenue.

Question 10

In 1994 Pentium users around the world learned that their $4.00 pocket calculators could perform some operations more accurately than their $5,000 desktop computers.It took several months before Intel-the maker of the chip-agreed to offer its customers replacement chips.In contrast,Walmart guarantees satisfaction to all customers,with a "no questions asked" return policy on nearly all of the products it sells.Why do you think these firms employ such different consumer relations policies?

Accepted Answer

The answer of In 1994 Pentium users around the world...

Question 11

Regardless of the economic environment,every firm will maximize profits by operating at the minimum point of its average total cost curves.Is this statement true or false?

Accepted Answer

The answer of Regardless of the economic environment,every firm will...

Question 12

Beta Industries manufactures floppy disks that consumers perceive as identical to those produced by numerous other manufacturers.Recently,Beta hired an econometrician to estimate its cost function for producing boxes of one dozen floppy disks.The estimated cost function is C = 20 + 2Q². a.What are the firm's fixed costs? b.What is the firm's marginal cost? Now suppose other firms in the market sell the product at a price of $10. c.How much should this firm charge for the product? d.What is the optimal level of output to maximize profits? e.How much profit will be earned? f.In the long run,should this firm continue to operate or shut down? Why?

Accepted Answer

The answer of Beta Industries manufactures floppy disks that consumers...

Question 13

A monopoly has produced a product with a patent for the last few years.The patent is going to expire.What will happen after the patent expires?

Accepted Answer

A)  The incumbent will leave the market. 
B)  The incumbent will retain its status as a monopoly but produce at a lower price. 
C)  Some firms will enter the industry. 
D)  None of the preceding answers is correct.

Question 14

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

Accepted Answer

A)  45. 
B)  55. 
C)  60. 
D)  50.

Question 15

You are a manager for a monopolistically competitive firm.From experience,the profit-maximizing level of output of your firm is 100 units.However,it is expected that prices of other close substitutes will fall in the near future.How should you adjust your level of production in response to this change?

Accepted Answer

A)  Produce more than 100 units. 
B)  Produce less than 100 units. 
C)  Produce 100 units. 
D)  Insufficient information to decide.

Question 16

Which of the following is NOT a basic feature of a monopolistically competitive industry?

Accepted Answer

A)  There are many buyers and sellers in the industry. 
B)  Each firm in the industry produces a differentiated product. 
C)  There is free entry and exit into the industry. 
D)  Each firm owns a patent on its product.

Question 17

Compute the marginal revenue when the price elasticity of demand is −0.25.

Accepted Answer

A)  −3P, meaning marginal revenue is negative and 3 times greater than price. 
B)  3P, meaning marginal revenue is positive and 3 times greater than price. 
C)  −0.33P, meaning that marginal revenue is negative and one-third of the price. 
D)  −0.25P, meaning that marginal revenue is negative and one-fourth of the price.

Question 18

Consider a monopoly where the inverse demand for its product is given by P = 200 − 5Q.Based on this information,the marginal revenue function is:

Accepted Answer

A)  MR(Q) = 400 − 2.5Q. 
B)  MR(Q) = 400 − 10Q. 
C)  MR(Q) = 200 − 10Q. 
D)  MR(Q) = 200 − 2.5Q.

Question 19

A firm can produce two products with the cost function C(Q1,Q2)= 10 + 5Q1 + 5Q2 − 0.2Q1Q2.The firm enjoys:

Accepted Answer

A)  economies of scale in the two products separately. 
B)  economies of scope. 
C)  cost complementarity. 
D)  economies of scale in the two products separately and cost complementarity.

Question 20

Firms have market power in:

Accepted Answer

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

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

You are the manager of a firm that has an exclusive license to produce your product.The inverse market demand curve is P = 900 - 1.5Q.Your cost function is C(Q)= 2Q + Q².Determine the output you should produce,the price you should charge,and your profits.

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

You are the manager of a monopoly that faces a demand curve described by P = 63 − 5Q.Your costs are C = 10 + 3Q.Your firm's maximum profits are:

Monsanto,the maker of Nutrasweet,owned the patent to aspartame,the official name of the sweetener.In 1987 Monsanto's patent expired in Europe,allowing other firms to produce aspartame under other brand names.What impact do you think this had on the market for aspartame and Monsanto's profits?

Economies of scale exist whenever:

A monopoly has two production plants with cost functions C₁ = 40 + 0.2Q₁² and C₂ = 50 + 0.1Q₂².The demand it faces is Q = 480 − 5P.What is the profit-maximizing price?

If a monopolist has an own price demand elasticity of −.8,is it maximizing profits?

You are the manager of a monopolistically competitive firm.The present demand curve you face is P = 100 - 4Q.Your cost function is C(Q)= 50 + 8.5Q². a.What level of output should you choose to maximize profits? b.What price should you charge? c.What will happen in your market in the long run?

You are the manager of a monopoly firm with (inverse) demand given by P = 50 − 0.5Q.Your firm's cost function is C = 40 + 5Q².Your firm's marginal revenue is:

Regardless of the economic environment,every firm will maximize profits by operating at the minimum point of its average total cost curves.Is this statement true or false?

A monopoly has produced a product with a patent for the last few years.The patent is going to expire.What will happen after the patent expires?

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

Which of the following is NOT a basic feature of a monopolistically competitive industry?

Compute the marginal revenue when the price elasticity of demand is −0.25.

Consider a monopoly where the inverse demand for its product is given by P = 200 − 5Q.Based on this information,the marginal revenue function is:

A firm can produce two products with the cost function C(Q₁,Q₂) = 10 + 5Q₁ + 5Q₂ − 0.2Q₁Q₂.The firm enjoys:

Firms have market power in:

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

You are the manager of a firm that has an exclusive license to produce your product.The inverse market demand curve is P = 900 - 1.5Q.Your cost function is C(Q)= 2Q + Q2.Determine the output you should produce,the price you should charge,and your profits.

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

You are the manager of a monopoly that faces a demand curve described by P = 63 − 5Q.Your costs are C = 10 + 3Q.Your firm's maximum profits are:

Monsanto,the maker of Nutrasweet,owned the patent to aspartame,the official name of the sweetener.In 1987 Monsanto's patent expired in Europe,allowing other firms to produce aspartame under other brand names.What impact do you think this had on the market for aspartame and Monsanto's profits?

Economies of scale exist whenever:

A monopoly has two production plants with cost functions C1 = 40 + 0.2Q12 and C2 = 50 + 0.1Q22.The demand it faces is Q = 480 − 5P.What is the profit-maximizing price?

If a monopolist has an own price demand elasticity of −.8,is it maximizing profits?

You are the manager of a monopolistically competitive firm.The present demand curve you face is P = 100 - 4Q.Your cost function is C(Q)= 50 + 8.5Q2. a.What level of output should you choose to maximize profits? b.What price should you charge? c.What will happen in your market in the long run?

You are the manager of a monopoly firm with (inverse) demand given by P = 50 − 0.5Q.Your firm's cost function is C = 40 + 5Q2.Your firm's marginal revenue is:

Regardless of the economic environment,every firm will maximize profits by operating at the minimum point of its average total cost curves.Is this statement true or false?

A monopoly has produced a product with a patent for the last few years.The patent is going to expire.What will happen after the patent expires?

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

Which of the following is NOT a basic feature of a monopolistically competitive industry?

Compute the marginal revenue when the price elasticity of demand is −0.25.

Consider a monopoly where the inverse demand for its product is given by P = 200 − 5Q.Based on this information,the marginal revenue function is:

A firm can produce two products with the cost function C(Q1,Q2) = 10 + 5Q1 + 5Q2 − 0.2Q1Q2.The firm enjoys:

Firms have market power in:

You are the manager of a firm that has an exclusive license to produce your product.The inverse market demand curve is P = 900 - 1.5Q.Your cost function is C(Q)= 2Q + Q².Determine the output you should produce,the price you should charge,and your profits.

A monopoly has two production plants with cost functions C₁ = 40 + 0.2Q₁² and C₂ = 50 + 0.1Q₂².The demand it faces is Q = 480 − 5P.What is the profit-maximizing price?

You are the manager of a monopolistically competitive firm.The present demand curve you face is P = 100 - 4Q.Your cost function is C(Q)= 50 + 8.5Q². a.What level of output should you choose to maximize profits? b.What price should you charge? c.What will happen in your market in the long run?

You are the manager of a monopoly firm with (inverse) demand given by P = 50 − 0.5Q.Your firm's cost function is C = 40 + 5Q².Your firm's marginal revenue is:

A firm can produce two products with the cost function C(Q₁,Q₂) = 10 + 5Q₁ + 5Q₂ − 0.2Q₁Q₂.The firm enjoys: