UGBA - Chapter 10

1. When the demand curve is downward sloping, marginal revenue is:

A) equal to price.

B) equal to average revenue.

C) less than price.

D) more than price.

C

2. Compared to the equilibrium price and quantity sold in a competitive

market, a monopolist will charge a ________ price and sell a ________

quantity.

A) higher; larger

B) lower; larger

C) higher; smaller

D) lower; smaller

E) none of these

C

3. Assume that a profit maximizing monopolist is producing a quantity

such that marginal revenue exceeds marginal cost. We can conclude that

the:

A) firm is maximizing profit.

B) firm's output is smaller than the profit maximizing quantity.

C) firm's output is larger than the profit maximizing quantity.

D) the firm’s output does not maximize profit, but we cannot conclude

whether the output is too large or too small.

B

4. As the manager of a firm you calculate the marginal revenue is $152

and marginal cost is $200. You should:

A) expand output.

B) do nothing without information about your fixed costs.

C) reduce output until marginal revenue equals marginal cost.

D) expand output until marginal revenue equals zero.

E) reduce output beyond the level where marginal revenue equals zero.

C

5. The monopolist has no supply curve because:

A) the quantity supplied at any price depends on the monopolist's

demand curve.

B) the monopolist's marginal cost curve changes considerably over time.

C) the relationship between price and quantity depends on both marginal

cost and average cost.

D) there is a single seller in the market.

E) although there is only a single seller at the current price, it is

impossible to know how many sellers would be in the market at higher

prices

A

6. Which of the following is NOT true for monopoly?

A) The profit maximizing output is the one at which marginal revenue

and marginal cost are equal.

B) Average revenue equals price.

C) The profit maximizing output is the one at which the difference

between total revenue and total cost is largest.

D) The monopolist's demand curve is the same as the market demand

curve.

E) At the profit maximizing output, price equals marginal cost.

E

7. If a monopolist sets her output such that marginal revenue, marginal

cost and average total cost are

equal, economic profit must be:

A) negative.

B) positive.

C) zero.

D) indeterminate from the given information.

B

8. Barbara is a producer in a monopoly industry. Her demand curve, total

revenue curve, marginal revenue curve and total cost curve are given as

follows:

Q = 160 - 4P TR = 40Q - 0.25 MR = 40 - 0.5Q TC = 4Q MC = 4

Refer to Scenario 10.1. How much output will Barbara produce?

A) 0

B) 22

C) 56

D) 72

E) none of the above

D

9. A monopolist faces the following demand curve, marginal revenue

curve, total cost curve and marginal cost curve for its product:

Q = 200 - 2P

MR = 100 - Q

TC = 5Q

MC = 5

What level of output maximizes total revenue?

A) 0

B) 90

C) 95

D) 100

E) none of the above

D

A monopolist faces the following demand curve, marginal revenue

curve, total cost curve and marginal cost curve for its product:

Q = 200 - 2P

MR = 100 - Q

TC = 5Q

MC = 5

What is the profit maximizing level of output?

A) 0

B) 90

C) 95

D) 100

E) none of the above

C

A monopolist faces the following demand curve, marginal revenue

curve, total cost curve and marginal cost curve for its product:

Q = 200 - 2P

MR = 100 - Q

TC = 5Q

MC = 5

Refer to question 9. What is the profit maximizing price?

A) $95.00

B) $5.00

C) $52.50

D) $10.00

C

Refer to question 9. How much profit does the monopolist earn?

A) $4512.50

B) $4987.50

C) $475.00

D) $5.00

A

The ________ elastic a firm's demand curve, the greater it________.

A) less; monopoly power

B) less; output

C) more; monopoly power

D) more; costs

A

Monopoly power results from the ability to:

A) set price equal to marginal cost.

B) equate marginal cost to marginal revenue.

C) set price above average variable cost.

D) set price above marginal cost.

D

What is the maximum value of the Lerner index?

A) Infinity

B) 100

C) Two

D) One

D