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Economic
Q:
Market power refers to
A) the ability of consumers to dictate what products should be produced.
B) the ability of a firm to advertise its product and succeed in selling more output.
C) the ability of a firm to sell at a lower price than rival sellers.
D) the ability of a firm to charge a price higher than the marginal cost of production.
Q:
Table 15-4Price per DoseQuantity Demanded (dose)Total Cost of Production (dollars)$800$807218264288563100484124405164326208247268168340Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows the demand and the total cost schedule for the firm.Refer to Table 15-4. What is the amount of the deadweight loss generated by Shakti when it produces the monopoly output?A) $124B) $42C) $36D) $12
Q:
Table 15-4Price per DoseQuantity Demanded (dose)Total Cost of Production (dollars)$800$807218264288563100484124405164326208247268168340Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows the demand and the total cost schedule for the firm.Refer to Table 15-4. What is the economically efficient output level?A) 5 unitsB) 6 unitsC) 7 unitsD) 8 units
Q:
Table 15-4Price per DoseQuantity Demanded (dose)Total Cost of Production (dollars)$800$807218264288563100484124405164326208247268168340Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows the demand and the total cost schedule for the firm.Refer to Table 15-4. What is the amount of Shakti's profit?A) $68B) $72C) $124D) $192
Q:
Table 15-4Price per DoseQuantity Demanded (dose)Total Cost of Production (dollars)$800$807218264288563100484124405164326208247268168340Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows the demand and the total cost schedule for the firm.Refer to Table 15-4. What is Shakti's profit-maximizing output?A) 4 unitsB) 5 unitsC) 6 unitsD) 7 units
Q:
Figure 15-10 Refer to Figure 15-10. The deadweight loss due to a monopoly is represented by the area
A) FHE.
B) FGE.
C) GEH.
D) FQ1Q2E.
Q:
Figure 15-10 Refer to Figure 15-10. What is the area that represents producer surplus under a monopoly?
A) the triangle 0P2E
B) the triangle 0P3H
C) the trapezium 0P1FH
D) the rectangle P1P3HF
Q:
Figure 15-10 Refer to Figure 15-10. Compared to a perfectly competitive market, consumer surplus is lower in a monopoly by an amount equal to the
A) areaFHE.
B) area FGE.
C) area P1P2EF.
D) area P1P2GF.
Q:
Figure 15-10 Refer to Figure 15-10. What is the area that represents consumer surplus under a monopoly?
A) the triangle P0P1F
B) the triangle P0P2E
C) the trapezium P1P2EF
D) the rectangle P1P3HF
Q:
Relative to a perfectly competitive market, a monopoly results in
A) a gain in producer surplus equal to the gain in consumer surplus.
B) a gain in producer surplus equal to the loss in consumer surplus.
C) a gain in producer surplus less than the loss in consumer surplus.
D) greater economic efficiency.
Q:
Why does a monopoly cause a deadweight loss?
A) because it does not produce some output for which marginal benefit exceeds marginal cost
B) because it appropriates a portion of consumer surplus for itself
C) because it increases producer surplus at the expense of consumer surplus
D) because it does not produce some output for which demand exceeds supply
Q:
Compared to perfect competition, the consumer surplus in a monopoly
A) is unchanged because price and output are the same.
B) is lower because price is higher and output is lower.
C) is higher because price is higher and output is the same.
D) is eliminated.
Q:
Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist.
Refer to Figure 15-9. At the profit-maximizing quantity, what is the difference between the monopoly's price and the marginal cost of production?
A) $8
B) $11.50
C) $21
D) There is no difference.
Q:
Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist.
Refer to Figure 15-9. What is the difference between the monopoly's price and perfectly competitive industry's price?
A) The monopoly's price is higher by $9.50.
B) The monopoly's price is higher by $13.
C) The monopoly's price is higher by $3.50.
D) The monopoly's price is higher by $21.
Q:
Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist.
Refer to Figure 15-9. What is the difference between the monopoly output and the perfectly competitive output?
A) 140 units
B) 240 units
C) 340 units
D) 560 units
Q:
Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist.
Refer to Figure 15-9. What is the economically efficient output level?
A) 600 units
B) 800 units
C) 940 units
D) 1160 units
Q:
A profit maximizing monopoly's price is
A) the same as the price that would prevail if the industry was perfectly competitive.
B) less than the price that would prevail if the industry was perfectly competitive.
C) greater than the price that would prevail if the industry was perfectly competitive.
D) not consistently related to price that would prevail if the market was perfectly competitive.
Q:
Economic efficiency in a free market occurs when
A) consumer surplus is maximized.
B) producer surplus is maximized.
C) the sum of consumer surplus and producer surplus is maximized.
D) price is as low as possible.
Q:
Figure 15-8 Figure 15-8 reflects the cost and revenue structure for a monopoly that has been in business for a very long time.
Refer to Figure 15-8. Use the figure above to answer the following questions.
a. Identify the curves labeled A and B. Identify the curve which contains both point Y and point Z. Identify the curve which contains both point V and point W.
b. What is the profit-maximizing quantity and what price will the monopolist charge?
c. What area represents total revenue at the profit-maximizing output level?
d. What area represents total cost at the profit-maximizing output level?
e. What area represents profit?
f. What is the profit per unit (average profit) at the profit-maximizing output level?
g. If this industry was organized as a perfectly competitive industry, what would be the profit-maximizing price and quantity?
h. What area represents the deadweight loss as a result of a monopoly?
Q:
Figure 15-7 Refer to Figure 15-7. Use the figure above to answer the following questions.
a. What is the profit-maximizing quantity and what price will the monopolist charge?
b. What is the total revenue at the profit-maximizing output level?
c. What is the total cost at the profit-maximizing output level?
d. What is the profit?
e. What is the profit per unit (average profit) at the profit-maximizing output level?
f. If this industry was organized as a perfectly competitive industry, what would be the profit-maximizing price and quantity?
Q:
Explain whether a monopoly that maximizes profit will also be maximizing revenue and production.
Q:
"Being the only seller in the market, the monopolist can choose any price and quantity it desires." Evaluate this statement: is it true or false? Explain your answer.
Q:
What is the difference between a monopoly's marginal revenue curve and a perfect competitor's marginal revenue curve?
Q:
Explain why the monopolist has no supply curve?
Q:
What happens to a monopoly's revenue when it sells more units of its product?
Q:
What is the relationship between marginal revenue and average revenue for a monopolist and is it the same for a perfect competitor?
Q:
A monopolist currently sells 18 units of a good. If marginal revenue on the last unit sold is $117, then the price of the good must be less than $117.
Q:
If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43, then the incremental profit from the last unit sold is $7.
Q:
A monopolist's demand curve is the same as the marginal revenue curve for the product.
Q:
To maximize profit, a monopolist will produce and sell a quantity such that for the last unit sold, marginal revenue equals marginal cost, and charges a price given by the demand curve at that output level.
Q:
In the short-run, even if a monopoly's total revenue does not cover its variable costs, it should continue to produce because ultimately in the long run, the monopoly will start earning profits.
Q:
If a monopolist's marginal revenue is $15 per unit and its marginal cost is $25, then to maximize profit the firm should decrease output.
Q:
If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43, then the average profit is $7.
Q:
The demand curve for a monopoly firm
A) is perfectly inelastic.
B) lies below its marginal revenue curve.
C) is the same as the market demand curve.
D) is horizontal.
Q:
Which of the following statements is true?
A) Monopolists are price makers. All other firms are price takers.
B) Unlike other industries, monopoly industries have high barriers to entry.
C) Only monopoly firms are granted patents and copyrights.
D) Unlike other firms, a monopolist's demand curve is the same as the market demand curve.
Q:
If a monopolist's price is $50 at 63 units of output and marginal revenue equals marginal cost and average total cost equals $43, then the firm's total profit is
A) $3,150.
B) $2,709.
C) $441.
D) $7.
Q:
If a monopolist's marginal revenue is $35 per unit and its marginal cost is $25, then
A) to maximize profit the firm should increase output.
B) to maximize profit the firm should decrease output.
C) to maximize profit the firm should continue to produce the output it is producing.
D) Not enough information is given to say what the firm should do to maximize profit.
Q:
To maximize profit a monopolist will produce where
A) marginal revenue is equal to marginal cost.
B) demand for its product is unit-elastic.
C) revenue per unit is maximized.
D) average total cost is equal to average revenue.
Q:
Table 15-3PriceQuantityTotal RevenueMarginal RevenueTotal CostMarginal Cost$173$51-----$56-----16464$1363$71557511718146849809137917901012896510111Assume Table 15-3 gives the monthly demand and costs for subscriptions to basic cable for Comcast, a cable television monopoly in Philadelphia.Refer to Table 15-3. If Comcast maximizes its profits how much profit will it earn?A) $84B) $40C) $4D) Comcast will break even.
Q:
Table 15-3PriceQuantityTotal RevenueMarginal RevenueTotal CostMarginal Cost$173$51-----$56-----16464$1363$71557511718146849809137917901012896510111Assume Table 15-3 gives the monthly demand and costs for subscriptions to basic cable for Comcast, a cable television monopoly in Philadelphia.Refer to Table 15-3. If Comcast wants to maximize its profits, what price (P) should it charge and how many cable subscriptions per month (Q) should it sell?A) P = $12; Q = 8B) P = $14; Q = 6C) P = $16; Q = 4D) P = $15: Q = 5
Q:
Figure 15-6 Figure 15-6 shows the cost and demand curves for a monopolist.
Refer to Figure 15-6. The monopolist earns a profit of
A) $0.
B) $170.
C) $248.
D) $372.
Q:
Figure 15-6 Figure 15-6 shows the cost and demand curves for a monopolist.
Refer to Figure 15-6. The monopolist's total cost is
A) $1,116.
B) $1,240.
C) $1,660.
D) $1,726.40.
Q:
Figure 15-6 Figure 15-6 shows the cost and demand curves for a monopolist.
Refer to Figure 15-6. The monopolist's total revenue is
A) $1,116.
B) $1,488.
C) $1,726.40
D) $1,826.
Q:
Figure 15-6 Figure 15-6 shows the cost and demand curves for a monopolist.
Refer to Figure 15-6. The profit-maximizing output and price for the monopolist are
A) output = 62; price = $24.
B) output = 62; price = $18.
C) output = 83; price = $22.
D) output = 104; price = $20.80.
Q:
Table 15-2Quantity per Day (cases)Price per CaseTotal Cost1$16$7.002159.5031411.0041312.0051214.5061117.5071021.008925.009830.0010735.50The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes. Table 15-2 shows the cost and demand data for this government protected monopolist.Refer to Table 15-2. What is the amount of profit that the firm earns?A) $34.50B) $42C) $47D) $49
Q:
Table 15-2Quantity per Day (cases)Price per CaseTotal Cost1$16$7.002159.5031411.0041312.0051214.5061117.5071021.008925.009830.0010735.50The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes. Table 15-2 shows the cost and demand data for this government protected monopolist.Refer to Table 15-2. What is the profit-maximizing quantity and price for the monopolist?A) Quantity = 8 cases, Price = $9B) Quantity = 7 cases, Price = $10C) Quantity = 9 cases, Price = $8D) Quantity = 10 cases, Price = $7
Q:
Figure 15-5 Refer to Figure 15-5. If the monopolist charges price P* for output Q*, in order to maximize profit or minimize loss in the short run, it should
A) continue to produce because price is greater than average variable cost.
B) shut down because price is greater than marginal cost.
C) shut down because price is less than average total cost.
D) continue to produce because a monopolist always earns a profit.
Q:
Wendell can sell five motor homes per week at a price of $22,000. If he lowers the price of motor homes to $20,000 per week he will sell six motor homes. What is the marginal revenue of the sixth motor home?
A) $10,000
B) $12,000
C) $20,000
D) $22,000
Q:
Firms that face downward-sloping demand curves for their output in the product market are called
A) price takers.
B) price dictators.
C) monopolists.
D) price makers.
Q:
A price maker is
A) a person who actively seeks out the best price for a product that he or she wishes to buy.
B) a firm that has some control over the price of the product it sells.
C) a firm that is able to sell any quantity at the highest possible price.
D) a consumer who participates in an auction where she announces her willingness to pay for a product.
Q:
Which of the following is true for a monopolist?
A) Being the only seller in the market, the monopolist faces a perfectly inelastic demand curve.
B) Being the only seller in the market, the monopolist faces a perfectly elastic demand curve.
C) Being the only seller in the market, the monopolist faces the market demand curve.
D) Being the only seller in the market, the monopolist faces a downward sloping demand curve that lies below the marginal revenue curve.
Q:
A monopoly firm's demand curve
A) is the same as the market demand curve.
B) is perfectly inelastic.
C) is more inelastic than the demand curve for the product.
D) is inelastic at high prices and elastic at lower prices.
Q:
Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist.
Refer to Figure 15-4. What is likely to happen to this monopoly in the long run?
A) New firms will enter the market to eliminate its profits.
B) It will expand its output to take advantage of economies of scale so as to further increase its profit.
C) As long as there are entry barriers, this firm will continue to enjoy economic profits.
D) It will be regulated by the government because of its excess profits.
Q:
Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist.
Refer to Figure 15-4. What is the amount of the monopoly's profit?
A) $2,700
B) $4,200
C) $10,400
D) $12,600
Q:
Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist.
Refer to Figure 15-4. What is the amount of the monopoly's total cost of production?
A) $21,600
B) $17,700
C) $9,340
D) $7,800
Q:
Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist.
Refer to Figure 15-4. What is the amount of the monopoly's total revenue?
A) $21,600
B) $20,400
C) $19,740
D) $7,800
Q:
Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist.
Refer to Figure 15-4. What is the price charged for the profit-maximizing output level?
A) $13
B) $21
C) $27
D) $34
Q:
Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist.
Refer to Figure 15-4. What is the profit-maximizing/loss-minimizing output level?
A) 600 units
B) 800 units
C) 940 units
D) 1,160 units
Q:
Figure 15-3 Figure 15-3 above shows the demand and cost curves facing a monopolist.
Refer to Figure 15-3. What happens to the monopolist represented in the diagram in the long run?
A) It will raise its price at least until it breaks even.
B) If the cost and demand curves remain the same, it will exit the market.
C) The government will subsidize the monopoly to enable it to break even.
D) It will be forced out of business by more efficient producers.
Q:
Figure 15-3 Figure 15-3 above shows the demand and cost curves facing a monopolist.
Refer to Figure 15-3. Suppose the monopolist represented in the diagram above produces positive output. What is the profit/loss per unit?
A) loss of $7 per unit
B) profit of $30 per unit
C) loss of $21 per unit
D) profit of $14 per unit
Q:
Figure 15-3 Figure 15-3 above shows the demand and cost curves facing a monopolist.
Refer to Figure 15-3. Suppose the monopolist represented in the diagram above produces positive output. What is the price charged at the profit-maximizing/loss-minimizing output level?
A) $38
B) $54
C) $68
D) $75
Q:
Figure 15-3 Figure 15-3 above shows the demand and cost curves facing a monopolist.
Refer to Figure 15-3. Suppose the monopolist represented in the diagram above produces positive output. What is the profit-maximizing/loss-minimizing output level?
A) 630 units
B) 800 units
C) 850 units
D) 880 units
Q:
Long-run economic profits would most likely exist in which market structure?
A) monopoly, monopolistic competition and oligopoly
B) monopoly and oligopoly
C) monopoly and monopolistic competition
D) monopoly only
Q:
Which of the following statements applies to a monopolist but not to a perfectly competitive firm at their profit maximizing outputs?
A) Marginal revenue is less than price.
B) Marginal revenue equals marginal cost.
C) Price equals marginal cost.
D) Average revenue equals average cost.
Q:
Table 15-1Price per UnitQuantity Demanded (units)Total Cost of Production (dollars)$8510$530801154075125507013560651457560155955516625A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 15-1.Refer to Table 15-1. What is the amount of the firm's profit?A) $335B) $350C) $880D) $910
Q:
Table 15-1Price per UnitQuantity Demanded (units)Total Cost of Production (dollars)$8510$530801154075125507013560651457560155955516625A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 15-1.Refer to Table 15-1. What is the firm's profit-maximizing output and what is the price charged to sell this output?A) P = $85; Q = 10B) P = $80; Q = 11C) P = $70; Q = 13D) P = $65; Q = 14
Q:
Table 15-1Price per UnitQuantity Demanded (units)Total Cost of Production (dollars)$8510$530801154075125507013560651457560155955516625A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 15-1.Refer to Table 15-1. What is the marginal revenue from the sale of the 12th unit?A) $75B) $50C) $20D) -$5
Q:
If a firm's average total cost is less than price where MR=MC,
A) the firm should shut down.
B) the firm should raise its price.
C) the firm should continue to produce the output it is producing.
D) the firm should cut back on its output to lower its cost.
Q:
Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist.
Refer to Figure 15-2. If the firm's average total cost curve is ATC3, the firm will
A) suffer a loss.
B) break even.
C) make a profit.
D) face competition.
Q:
Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist.
Refer to Figure 15-2. If the firm's average total cost curve is ATC2, the firm will
A) suffer a loss.
B) break even.
C) make a profit.
D) face competition.
Q:
Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist.
Refer to Figure 15-2. If the firm's average total cost curve is ATC1, the firm will
A) suffer a loss.
B) break even.
C) make a profit.
D) face competition.
Q:
Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist.
Refer to Figure 15-2. The firm's profit-maximizing price is
A) P1.
B) P2.
C) P3.
D) P4.
Q:
Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist.
Refer to Figure 15-2. To maximize profit, the firm will produce
A) Q1.
B) Q2.
C) Q3.
D) Q4.
Q:
If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25, then
A) to maximize profit the firm should increase output.
B) to maximize profit the firm should decrease output.
C) to maximize profit the firm should continue to produce the output it is producing.
D) Not enough information is given to say what the firm should do to maximize profit.
Q:
If a monopolist's price is $50 per unit and its marginal cost is $25, then
A) to maximize profit the firm should increase output.
B) to maximize profit the firm should decrease output.
C) to maximize profit the firm should continue to produce the output it is producing.
D) Not enough information is given to say what the firm should do to maximize profit.
Q:
If a theatre company expects $250,000 in ticket revenue from five performances and $288,000 in ticket revenue if it adds a sixth performance, the
A) marginal revenue of the sixth performance is $48,000.
B) marginal revenue of the sixth performance is $38,000.
C) cost of staging the sixth performance is probably higher than the cost of staging the previous five.
D) company will be making a loss on the sixth performance because its ticket sales will be less than the average received from the previous five.
Q:
Because a monopoly's demand curve is the same as the market demand curve for its product
A) the monopoly's marginal revenue equals its price.
B) the monopoly is a price taker.
C) the monopoly must lower its price to sell more of its product.
D) the monopoly's average total cost always falls as it increases its output.
Q:
Microsoft hires marketing and sales specialists to decide what prices it should set for its products, whereas a wealthy corn farmer in Iowa, who sells his output in the world commodity market, does not. Why is this so?
A) because Microsoft is large enough to hire the best people in the field
B) because Microsoft could potentially lose sales if it sets prices indiscriminately
C) because the wealthy corn farmer is a price taker who chooses his optimal output independently of market price but Microsoft's optimal output depends on the price it selects
D) because unlike Microsoft, the wealthy corn farmer is probably a monopolist
Q:
A monopolist's profit maximizing price and output correspond to the point on a graph
A) where average total cost is minimized.
B) where total costs are the smallest relative to price.
C) where marginal revenue equals marginal cost and charging the price on the market demand curve for that output.
D) where price is as high as possible.
Q:
The demand curve for the monopoly's product is
A) the market demand for the product.
B) more elastic than the market demand for the product.
C) more inelastic than the market demand for the product.
D) undefined.