Deck 6: Monopoly and Monopolistic Competition

Question 1

If a monopolist's demand curve is linear, its marginal revenue curve is and has a slope that is as the demand curve.

A)upward sloping; twice as steep
B)linear; twice as steep
C)linear; the same
D)upward sloping; the same

Answer 1

B

Question 2

For any demand curve, the marginal revenue is when the demand is .

A)positive; inelastic
B)negative; inelastic
C)negative; elastic
D)negative; unit elastic

Answer 2

B

Question 3

A monopoly is charging $25 for its product and at this price, the price elasticity of demand is 2. What is its marginal revenue?

A)$15.50
B)$12.50
C)$25.00
D)$2.00

Answer 3

B

Question 4

A monopoly is charging $60 for its product and at this price, the price elasticity of demand is 1.5. What is its marginal revenue?

A)$1.50
B)$30
C)$60
D)$20

Question 5

If the price elasticity of demand is 1.5 and the marginal revenue is $50, what is the price of the product?

A)$50
B)$15
C)$100
D)$150

Question 6

The the price elasticity of demand, the marginal revenue is to price.

A)smaller; closer
B)larger; further
C)smaller; further
D)larger; closer

Question 7

The above table shows a sample of prices and the quantity sold by a monopolist.
Refer to the table above. What is the monopolist's total revenue if they charge a price of $95?

A)$10
B)$9,450
C)$95
D)$9,500

Question 8

A monopoly is charging $15 for its product and at this price, the price elasticity of demand is 1.0. What is its marginal revenue?

A)- $15
B)$15
C)$0
D)$1

Question 9

The above table shows a sample of prices and the quantity sold by a monopolist.
Refer to the table above. What is the monopolist's marginal revenue of the 96th unit?

A)- $4
B)$4
C)$8
D)$9,504

Question 10

For any demand curve, the marginal revenue is when the demand is .

A)positive; elastic
B)negative; elastic
C)negative; unit elastic
D)positive; inelastic

Question 11

All of the following are characteristics of a monopoly market except which one?

A)a single seller in the market
B)an insurmountable barrier to entry exists
C)the firm is a price- taker
D)no close substitutes to the good produced in the market

Question 12

A monopoly is charging $500 for its product and at this price, the price elasticity of demand is 1.0. What is its marginal revenue?

A)$500
B)- $500
C)$1
D)$0

Question 13

A monopolist with a linear demand curve will have a marginal revenue curve with intercept and slope as the demand curve.

A)the same; the same
B)the same; steeper
C)a steeper; the same
D)a steeper; steeper

Question 14

A monopoly is charging $10 for its product and at this price, the price elasticity of demand is 0.25. What is its marginal revenue?

A)- $25
B)$25
C)- $30
D)$30

Question 15

The above table shows a sample of prices and the quantity sold by a monopolist.
Refer to the table above. What is the monopolist's marginal revenue of the 98th unit?

A)$2
B)- $4
C)$0
D)- $2

Question 16

If the price elasticity of demand is 1.2 and the marginal revenue is $20, what is the price of the product?

A)$12
B)$20
C)$120
D)$1,200

Question 17

All of the following are true regarding a monopolist's marginal revenue except which one?

A)It is equal to the change in total revenue resulting from a change in quantity sold.
B)It is less than the price for all units produced.
C)It is downward sloping.
D)It is equal to price for all units produced.

Question 18

For units a monopoly produces, the price is than the marginal revenue.

A)all; less
B)all; greater
C)some; greater
D)some; less

Question 19

All of the following are true regarding a monopolist's marginal revenue except which one?

A)It is downward sloping.
B)It is horizontal.
C)It is equal to the change in total revenue resulting from a change in quantity sold.
D)It is less than the price for all units produced.

Question 20

A monopoly is charging $40 for its product and at this price, the price elasticity of demand is 0.5. What is its marginal revenue?

A)- $40
B)$10
C)$40
D)- $10

Question 21

If a monopolist is producing the profit- maximizing output level and at this output level, the marginal cost is $4 and the profit- maximizing price is $9, what is the markup?

A)2.25
B)0.22
C)5
D)2

Question 22

It is not possible for a monopolist to have a negative marginal revenue.

Question 23

A monopoly's demand curve is the same as the market demand curve.

Question 24

In order for a monopolist to sell more of its product, it must lower price.

Question 25

The above table shows a sample of prices and the quantity sold by a monopolist.
Refer to the table above. What is the monopolist's marginal revenue of the 100th unit?

A)$4
B)$0
C)- $6
D)- $4

Question 26

The smaller the price elasticity of demand, the the profit- maximizing price and the the markup.

A)lower; larger
B)higher; smaller
C)higher; larger
D)lower; smaller

Question 27

Managers of a monopoly maximize profit in the long run by setting equal to .

A)marginal revenue; long- run average variable cost
B)marginal cost; long- run average cost
C)marginal revenue; long- run marginal cost
D)marginal cost; long- run average variable cost

Question 28

To maximize profit, a monopolist must _ .

A)produce the quantity that sets marginal revenue equal to marginal cost
B)produce the quantity that makes the difference between marginal revenue and marginal cost (MR - MC)negative
C)produce the quantity that makes the marginal revenue exceed the marginal cost
D)produce the quantity that makes the difference between marginal revenue and marginal cost (MR - MC)positive

Question 29

If a monopoly is earning positive economic profit in the short run, it possible for the firm to earn positive economic profit in the long run as long as .

A)is not; marginal revenue equals the long- run marginal cost
B)is; average total cost exceeds the price
C)is; an insurmountable barrier exists
D)is not; an insurmountable barrier exists

Question 30

The above table shows a sample of prices and the quantity sold by a monopolist.
Refer to the table above. At a price of $96, which of the following statements is true regarding the price elasticity of demand?

A)The price elasticity of demand is less than one.
B)The price elasticity of demand is equal to 2.0.
C)The price elasticity of demand is equal to one.
D)The price elasticity of demand is greater than one.

Question 31

If a monopolist is producing the profit- maximizing output level and at this output level, the marginal cost is $5 and the profit- maximizing price is $12, what is the markup?

A)3
B)1.25
C)2.4
D)0.42

Question 32

The larger the price elasticity of demand, the the profit- maximizing price and the the markup.

A)higher; smaller
B)lower; smaller
C)lower; larger
D)higher; larger

Question 33

At the profit- maximizing quantity, the price elasticity of demand is 2.5. What is the markup?

A)0.71
B)1.67
C)2.57
D)1.32

Question 34

The above table shows a sample of prices and the quantity sold by a monopolist.
Refer to the table above. What is the price elasticity of demand at a price of $97?

A)0
B)1.04
C)1
D)0.89

Question 35

A monopolist's marginal revenue is greater than the price for all units produced.

Question 36

If a monopolist has a downward- sloping, nonlinear demand curve, the price will exceed the marginal revenue for all units produced.

Question 37

If an insurmountable barrier to entry is lifted and a market that was once dominated by a monopolist is now perfectly competitive, the total surplus will .

A)increase
B)decrease
C)not change
D)decrease by exactly 50 percent

Question 38

The above table shows a sample of prices and the quantity sold by a monopolist.
Refer to the table above. At a price of $99, which of the following statements is true regarding the price elasticity of demand?

A)The price elasticity of demand is equal to 2.0.
B)The price elasticity of demand is equal to one.
C)The price elasticity of demand is less than one.
D)The price elasticity of demand is greater than one.

Question 39

The above table shows a sample of prices and the quantity sold by a monopolist.
Refer to the table above. What is the monopolist's marginal revenue of the 101st unit?

A)$0
B)- $2
C)- $6
D)$6

Question 40

If an insurmountable barrier to entry is lifted and a market that was once dominated by a monopolist is now perfectly competitive, the market equilibrium price will be _ and the market equilibrium quantity will be _.

A)lower; higher
B)higher; lower
C)lower; lower
D)higher; higher

Question 41

If Sweet Dreams controls 85 percent of the market for insomnia drugs and the remaining 15 percent of the market includes many other, smaller competing firms, Sweet Dreams is a firm.

A)monopoly
B)competitive fringe
C)dominant
D)perfectly competitive

Question 42

As a natural monopoly _ production, its constantly falls throughout the range of demand.

A)increases; long- run average cost
B)decreases; marginal cost
C)increases; sunk cost
D)decreases; long- run average cost

Question 43

The more substitutes a good has, the larger the markup.

Question 44

To maximize profits, a perfectly competitive firm and a monopoly will set equal to .

A)marginal revenue; marginal cost
B)marginal cost; average total cost
C)marginal revenue; average total cost
D)marginal cost; average variable cost

Question 45

The above table shows the quantity demanded at varying prices and the corresponding marginal cost of production for a mon firm.
Refer to the table above. If the monopoly produces 40 units, charges the corresponding price of $320, and its average total cost to produce the 40 units is $206, what is their profit or loss?

A)$4,560
B)$56,000
C)$12,600
D)- $4,560

Question 46

The above table shows the quantity demanded at varying prices and the corresponding marginal cost of production for a mon firm.
Refer to the table above. If the monopoly produces 20 units, charges the corresponding price of $360, and its average total cost to produce the 20 units is $187, what is their profit or loss?

A)- $2,350
B)$4,560
C)- $3,400
D)$3,460

Question 47

The Ronald McDonald character that is used to advertise McDonald's restaurants is an example of a .

A)patent
B)copyright
C)trademark
D)trade secret

Question 48

The above table shows the quantity demanded at varying prices and the corresponding marginal cost of production for a mon firm.
Refer to the table above. What is the monopolist's total revenue from producing 40 units of output?

A)$12,800
B)$300
C)$10,200
D)$260

Question 49

A deadweight loss can result from producing less or more than the efficient quantity.

Question 50

If a monopoly's total revenue is less than its variable cost, it should shut- down in order to minimize its loss.

Question 51

If Walt Disney Company produces a new animated movie for children, they are likely to seek a to protect the work.

A)copyright
B)trade secret
C)patent
D)trademark

Question 52

The above table shows the quantity demanded at varying prices and the corresponding marginal cost of production for a mon firm.
Refer to the table above. What is the marginal revenue of producing the 40th unit of output?

A)$2,600
B)$12,000
C)$260
D)$12,800

Question 53

The above table shows the quantity demanded at varying prices and the corresponding marginal cost of production for a mon firm.
Refer to the table above. What is the profit- maximizing output level?

A)40 units
B)50 units
C)60 units
D)30 units

Question 54

All of the following are barriers to entry except which one?

A)patents
B)control of an essential raw material
C)the presence of a natural monopoly in the market
D)a deadweight loss

Question 55

The above table shows the quantity demanded at varying prices and the corresponding marginal cost of production for a mon firm.
Refer to the table above. What is the marginal revenue of producing the 30th unit of output?

A)$10,200
B)$12,000
C)$3,000
D)$300

Question 56

If Sweet Dreams creates a new insomnia drug, the managers of Sweet Dreams are most likely to obtain which of the following to prevent another firm from copying their drug's formula?

A)patent
B)trade secret
C)trademark
D)copyright

Question 57

Monopolies always earn economic profits.

Question 58

All of the following are true for a natural monopoly except which one?

A)Its long- run average cost falls as production increases.
B)It has large economies of scale.
C)The quantity at which its long- run average cost first reaches a minimum exceeds the quantity consumers demand.
D)It has control over an essential raw material.

Question 59

The duck that is used to advertise AFLAC's insurance is an example of a _ .

A)patent
B)copyright
C)trademark
D)trade secret

Question 60

Firms with market power are price takers.

Question 61

The presence of a competitive fringe a dominant firm's markup.

A)exactly doubles
B)decreases
C)increases
D)does not affect

Question 62

If Fruit Toddler Treats controls 90 percent of the organic fruit popsicle market and the remaining 10 percent includes many other, smaller competing firms, Fruit Toddler Treats is a firm and the remaining firms are _.

A)competitive fringe; dominant
B)dominant; competitive fringe
C)monopoly; dominant firm
D)monopoly; competitive fringe

Question 63

At a price of $3.00, the total quantity demanded of a product is 125,000 units and the competitive fringe produces 20,000 units. What is the dominant firm's residual demand at a price of $3.00?

A)20,000
B)105,000
C)95,000
D)145,000

Question 64

A dominant firm's demand curve is the market demand curve at all points where the competitive fringe's production is _.

A)greater than; equal to zero
B)greater than; negative
C)identical to; equal to zero
D)identical to; negative

Question 65

If at its current production level, a dominant firm's marginal cost is $4 and its residual marginal revenue is $3, which of the following statements is true?

A)It should increase production to maximize profit.
B)It should exactly double production to maximize profit.
C)It should decrease production to maximize profit.
D)It is maximizing profit.

Question 66

For a dominant firm, the residual demand is the minus quantity supplied by the .

A)market supply; competitive fringe
B)market demand; competitive fringe
C)market supply; dominant firm
D)market demand; dominant firm

Question 67

If at its current production level, a dominant firm's marginal cost is $5.50 and its residual marginal revenue is $5.50, which of the following statements is true?

A)It is maximizing profit.
B)It should increase production to maximize profit.
C)It should cut production in half to maximize profit.
D)It should decrease production to maximize profit.

Question 68

At a price of $2.00, the total quantity demanded of a product is 30,000 units and the competitive fringe produces 12,000 units. What is the dominant firm's residual demand at a price of $2.00?

A)42,000
B)12,000
C)18,000
D)30,000

Question 69

If Frozen Super Paws Treats controls 89 percent of the market for frozen ice cream treats for dogs and the remaining 11 percent includes many other, smaller competing firms, Frozen Super Paws Treats is a firm.

A)dominant
B)perfectly competitive
C)competitive fringe
D)monopoly

Question 70

If Magic Wipes controls 83 percent of the sanitary wipes market and the remaining 17 percent includes many other, smaller competing firms, Magic Wipes is a _ firm and the remaining firms are _ _.

A)competitive fringe; dominant
B)monopoly; dominant firm
C)monopoly; competitive fringe
D)dominant; competitive fringe

Question 71

At a price of $1.50, the total quantity demanded of a product is 80,000 units and the competitive fringe produces 15,000 units. What is the dominant firm's residual demand at a price of $1.50?

A)95,000
B)65,000
C)50,000
D)80,000

Question 72

The dominant firm's demand curve is the residual demand curve until it reaches the price at which it intersects the .

A)the average cost curve
B)market supply curve
C)market demand curve
D)competitive fringe's supply curve

Question 73

If Best LED controls 87 percent of the LED light bulb market and the remaining 13 percent includes many other, smaller competing firms, Best LED is a _ _ firm and the remaining firms are .

A)monopoly; dominant firm
B)dominant; competitive fringe
C)competitive fringe; dominant
D)monopoly; competitive fringe

Question 74

If Happy Avocados controls 91 percent of the market for ready- made guacamole dip and the remaining 9 percent of the market includes many other, smaller competing firms, Happy Avocados is a firm.

A)monopoly
B)perfectly competitive
C)dominant
D)competitive fringe

Question 75

To maximize profit, a dominant firm sets equal to .

A)residual marginal revenue; marginal cost
B)residual demand; marginal cost
C)residual marginal revenue; residual marginal cost
D)marginal revenue; residual marginal cost

Question 76

If at its current production level, a dominant firm's marginal cost is $3 and its residual marginal revenue is $3, which of the following statements is true?

A)It should decrease production to maximize profit.
B)It is maximizing profit.
C)It should exactly double production to maximize profit.
D)It should increase production to maximize profit.

Question 77

If at its current production level, a dominant firm's marginal cost is $2 and its residual marginal revenue is $3, which of the following statements is true?

A)It should increase production to maximize profit.
B)It should decrease production to maximize profit.
C)It should cut production in half to maximize profit.
D)It is maximizing profit.

Question 78

The and the _ represent a dominant firm's demand and marginal revenue.

A)residual demand curve; residual marginal revenue curve
B)market demand curve; market marginal revenue curve
C)residual demand curve; market marginal revenue curve
D)market demand curve; residual marginal revenue curve

Question 79

At a price of $4.00, the total quantity demanded of a product is 95,000 units and the competitive fringe produces 15,000 units. What is the dominant firm's residual demand at a price of $4.00?

A)80,000
B)110,000
C)90,000
D)15,000

Question 80

At any quantity, the price elasticity of demand is _ on the residual demand curve than on the market demand curve. This means any change in price will lead to a _ change in the quantity demanded for the dominant firm compared to the change in quantity demanded in the market.

A)larger; larger
B)smaller; larger
C)smaller; smaller
D)larger; smaller