Question 1

To maximize profit, the monopolist sets:

Accepted Answer

A) price equal to marginal cost. 
B) total revenue equal to total cost. 
C) marginal revenue equal to marginal cost. 
D) marginal revenue equal to average cost. 
A) price equal to marginal cost. 
B) total revenue equal to total cost. 
C) marginal revenue equal to marginal cost. 
D) marginal revenue equal to average cost.

Question 2

A monopolist faces inverse demand $P = 300 - 6 Q$ and has total cost $T C = 120 Q + 6 Q ^ { 2 }$ and marginal cost $M C = 120 + 6 Q$. What is the maximum profit the monopolist can earn in this market?

Accepted Answer

A)  60 
B)  240 
C)  600 
D)  1200 
A)  60 
B)  240 
C)  600 
D)  1200

Question 3

The marginal revenue curve for a monopolist:

Accepted Answer

A) will never take a linear form. 
B) will always have double the slope of the demand curve, when demand is linear. 
C) will always have one-half the slope of the demand curve, when demand is linear. 
D) will slope upward when demand is elastic. 
A) will never take a linear form. 
B) will always have double the slope of the demand curve, when demand is linear. 
C) will always have one-half the slope of the demand curve, when demand is linear. 
D) will slope upward when demand is elastic.

Question 4

The horizontal sum of the marginal cost curves of individual plants is called multiplant marginal cost curve.

Accepted Answer

A) True 
 B)False

Question 5

A monopolist maximizes total revenue where marginal revenue:

Accepted Answer

A) equals marginal cost. 
B) is maximized. 
C) equals zero. 
D) is negative. 
A) equals marginal cost. 
B) is maximized. 
C) equals zero. 
D) is negative.

Question 6

The monopolist will always produce:

Accepted Answer

A) in the inelastic portion of the demand curve. 
B) at the unit elastic point on the demand curve. 
C) at the point of perfect elasticity. 
D) in the elastic portion of the demand curve. 
A) in the inelastic portion of the demand curve. 
B) at the unit elastic point on the demand curve. 
C) at the point of perfect elasticity. 
D) in the elastic portion of the demand curve.

Question 7

If the monopolist is producing where marginal revenue exceeds marginal cost, then the monopolist should ___________ to maximize profits.

Accepted Answer

A) produce more 
B) produce less 
C) stop producing 
D) raise price 
A) produce more 
B) produce less 
C) stop producing 
D) raise price

Question 8

Monopoly profits are maximized when total revenue is maximized.

Accepted Answer

A) True 
 B)False

Question 9

The Lerner Index is:

Accepted Answer

A) equal to (P - MR)/P. 
B) a measure of product differentiation. 
C) equal to P/MC. 
D) equal to (P - M
C) /P. 
A) equal to (P - MR)/P. 
B) a measure of product differentiation. 
C) equal to P/MC. 
D) equal to (P - M
C) /P.

Question 10

The monopolists average revenue can be defined as:

Accepted Answer

A) Total revenue per unit of average revenue 
B) Total revenue per unit of output 
C) Average revenue per unit of input 
D) AR = AR / Q 
A) Total revenue per unit of average revenue 
B) Total revenue per unit of output 
C) Average revenue per unit of input 
D) AR = AR / Q

Question 11

Economists consider monopolists

Accepted Answer

A) to be efficient, since they earn greater profits than perfect competitors. 
B) to be inefficient since all consumer surplus is transferred to the monopolist in the form of profits. 
C) to be inefficient since they earn less producers' surplus than all firms taken together in a competitive market. 
D) to be inefficient since the monopolist restricts output from the competitive level, thus creating dead-weight loss. 
A) to be efficient, since they earn greater profits than perfect competitors. 
B) to be inefficient since all consumer surplus is transferred to the monopolist in the form of profits. 
C) to be inefficient since they earn less producers' surplus than all firms taken together in a competitive market. 
D) to be inefficient since the monopolist restricts output from the competitive level, thus creating dead-weight loss.

Question 12

A monopolist faces linear inverse demand $P = a - b Q$ and constant marginal cost, $c$. Which of the following gives a correct formula for the monopolist's profit maximizing price?

Accepted Answer

A)  $P = ( a / b - c )$ 
B)  $P = a / 2$. 
C)  $P = ( a + c ) / 2$ 
D)  $P = a / 2 + c$. 
A)  $P = ( a / b - c )$ 
B)  $P = a / 2$. 
C)  $P = ( a + c ) / 2$ 
D)  $P = a / 2 + c$.

Question 13

Because the monopolist is the only seller of her product, she may sell any quantity that she chooses for any given price.

Accepted Answer

A) True 
 B)False

Question 14

Monopoly profits are generally zero.

Accepted Answer

A) True 
 B)False

Question 15

The condition, MC = MR, is the optimizing condition for monopolists and firms in perfectly competitive markets.

Accepted Answer

A) True 
 B)False

Question 16

A monopolist faces linear inverse demand $P = a - b Q$ and constant marginal cost, $c$. The term $a$ increases by amount $\Delta a$. By how much does the monopolist's optimal price increase?

Accepted Answer

A)  $\Delta a$. 
B)  $\Delta a / 2$. 
C)  $\Delta a - c$. 
D)  $\Delta a / b$. 
A)  $\Delta a$. 
B)  $\Delta a / 2$. 
C)  $\Delta a - c$. 
D)  $\Delta a / b$.

Question 17

IEPR states that the monopolist's optimal markup of price above marginal cost can be expressed as follows: the monopolist's optimal markup, expressed as a percentage of price, is equal to minus the inverse of the price elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following describes the relation between price elasticity of demand and a monopolist's marginal revenue?

Accepted Answer

A)  $M R = P \left( 1 + \varepsilon _ { Q , p } \right)$. 
B)  $M R = P \left( 1 + \frac { P } { Q } \frac { \Delta Q } { \Delta P } \right)$ 
C)  $M R = 1 + \varepsilon Q P$ 
D)  $M R = P \left( 1 + 1 / \varepsilon _ { Q , p } \right)$ 
A)  $M R = P \left( 1 + \varepsilon _ { Q , p } \right)$. 
B)  $M R = P \left( 1 + \frac { P } { Q } \frac { \Delta Q } { \Delta P } \right)$ 
C)  $M R = 1 + \varepsilon Q P$ 
D)  $M R = P \left( 1 + 1 / \varepsilon _ { Q , p } \right)$

Question 19

The term product differentiation refers to:

Accepted Answer

A) A situation in which two or more products possess technical differences, which may or may not be perceived by consumers. 
B) A situation in which two or more products possess attributes that, in the minds of consumers, set the products apart from one another and make them less than perfect substitutes. 
C) A situation in which two or more firms produce products for a given market. 
D) A situation in which two or more consumers purchase differing amounts of a product in a market. 
A) A situation in which two or more products possess technical differences, which may or may not be perceived by consumers. 
B) A situation in which two or more products possess attributes that, in the minds of consumers, set the products apart from one another and make them less than perfect substitutes. 
C) A situation in which two or more firms produce products for a given market. 
D) A situation in which two or more consumers purchase differing amounts of a product in a market.

Question 20

The Lerner Index for a firm operating in a perfectly competitive industry would be:

Accepted Answer

A) less than zero. 
B) zero. 
C) between zero and one. 
D) one. 
A) less than zero. 
B) zero. 
C) between zero and one. 
D) one.

To maximize profit, the monopolist sets:

A monopolist faces inverse demand $P = 300 - 6 Q$ and has total cost $T C = 120 Q + 6 Q ^ { 2 }$ and marginal cost $M C = 120 + 6 Q$ . What is the maximum profit the monopolist can earn in this market?

The marginal revenue curve for a monopolist:

The horizontal sum of the marginal cost curves of individual plants is called multiplant marginal cost curve.

A monopolist maximizes total revenue where marginal revenue:

The monopolist will always produce:

If the monopolist is producing where marginal revenue exceeds marginal cost, then the monopolist should ___________ to maximize profits.

Monopoly profits are maximized when total revenue is maximized.

The Lerner Index is:

The monopolists average revenue can be defined as:

Economists consider monopolists

A monopolist faces linear inverse demand $P = a - b Q$ and constant marginal cost, $c$ . Which of the following gives a correct formula for the monopolist's profit maximizing price?

Because the monopolist is the only seller of her product, she may sell any quantity that she chooses for any given price.

Monopoly profits are generally zero.

The condition, MC = MR, is the optimizing condition for monopolists and firms in perfectly competitive markets.

A monopolist faces linear inverse demand $P = a - b Q$ and constant marginal cost, $c$ . The term $a$ increases by amount $\Delta a$ . By how much does the monopolist's optimal price increase?

IEPR states that the monopolist's optimal markup of price above marginal cost can be expressed as follows: the monopolist's optimal markup, expressed as a percentage of price, is equal to minus the inverse of the price elasticity of demand.

Which of the following describes the relation between price elasticity of demand and a monopolist's marginal revenue?

The term product differentiation refers to:

The Lerner Index for a firm operating in a perfectly competitive industry would be:

Analyzing Economic Problems

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters

Exam 11: Monopoly and Monopsony

To maximize profit, the monopolist sets:

A monopolist faces inverse demand P=300−6QP = 300 - 6 QP=300−6Q and has total cost TC=120Q+6Q2T C = 120 Q + 6 Q ^ { 2 }TC=120Q+6Q2 and marginal cost MC=120+6QM C = 120 + 6 QMC=120+6Q . What is the maximum profit the monopolist can earn in this market?

The marginal revenue curve for a monopolist:

The horizontal sum of the marginal cost curves of individual plants is called multiplant marginal cost curve.

A monopolist maximizes total revenue where marginal revenue:

The monopolist will always produce:

If the monopolist is producing where marginal revenue exceeds marginal cost, then the monopolist should ___________ to maximize profits.

Monopoly profits are maximized when total revenue is maximized.

The Lerner Index is:

The monopolists average revenue can be defined as:

Economists consider monopolists

A monopolist faces linear inverse demand P=a−bQP = a - b QP=a−bQ and constant marginal cost, ccc . Which of the following gives a correct formula for the monopolist's profit maximizing price?

Because the monopolist is the only seller of her product, she may sell any quantity that she chooses for any given price.

Monopoly profits are generally zero.

The condition, MC = MR, is the optimizing condition for monopolists and firms in perfectly competitive markets.

A monopolist faces linear inverse demand P=a−bQP = a - b QP=a−bQ and constant marginal cost, ccc . The term aaa increases by amount Δa\Delta aΔa . By how much does the monopolist's optimal price increase?

IEPR states that the monopolist's optimal markup of price above marginal cost can be expressed as follows: the monopolist's optimal markup, expressed as a percentage of price, is equal to minus the inverse of the price elasticity of demand.

Which of the following describes the relation between price elasticity of demand and a monopolist's marginal revenue?

The term product differentiation refers to:

The Lerner Index for a firm operating in a perfectly competitive industry would be:

Analyzing Economic Problems

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters

A monopolist faces inverse demand $P = 300 - 6 Q$ and has total cost $T C = 120 Q + 6 Q ^ { 2 }$ and marginal cost $M C = 120 + 6 Q$ . What is the maximum profit the monopolist can earn in this market?

A monopolist faces linear inverse demand $P = a - b Q$ and constant marginal cost, $c$ . Which of the following gives a correct formula for the monopolist's profit maximizing price?

A monopolist faces linear inverse demand $P = a - b Q$ and constant marginal cost, $c$ . The term $a$ increases by amount $\Delta a$ . By how much does the monopolist's optimal price increase?