Question 1

Refer to the following figure:
  
The figure above shows the demand and cost curves facing a price-setting firm.
-What is marginal revenue when output is 100 units?

Accepted Answer

The answer of Refer to the following figure:
  
The...

Question 2

Which of the following is true of a monopolist in the long run?

Accepted Answer

A monopolist in the long run will charge a price higher than long-run marginal cost (A) and equal to or greater than long-run average cost (B), making both A and B correct.

Question 3

Refer to the following:
Columns 1 and 2 make up a portion of a monopolist's production function for a single variable input, labor. Columns 2 and 3 represent the demand function facing the monopolist over this range of output:
 $$\begin{array} { c c c } 
(1)& \text { (2) } & \text { (1) } \
\hline \text { Undsar Labor } & \text { Unds of Oupud } & \text { Price } \
\hline 3 & 370 & \$ 10 \
4 & 490 & 9 \
5 & 570 & 8 \
6 & 600 & 7 \
7 & 670 & 6
\end{array}$$
-How much does the fifth unit of labor add to the firm's total revenue?

Accepted Answer

The fifth unit of labor increases output from 490 to 570 units. The price drops from $9 to $8. The additional revenue is (570 - 490) * $8 = $640. However, the revenue lost from the price drop on the first 490 units is 490 * ($9 - $8) = $490. Therefore, the net addition to total revenue is $640 - $490 = $150.

Question 4

A firm with market power is producing a level of output at which price is $8, marginal revenue is $5, average variable cost is $6, and marginal cost is $10. In order to maximize profit, the firm should

Accepted Answer

In order to maximize profit, a firm with market power should produce at a level where marginal revenue equals marginal cost. In this case, the marginal cost of producing an additional unit is $10, but the marginal revenue generated from that unit is only $5. To maximize profit, the firm should reduce output until marginal revenue equals marginal cost, or $10. This means that the firm should decrease production and increase price. Therefore, the best choice is B: increase price.

Question 5

Suppose that a profit-maximizing monopolist has a plant of the optimal size and is producing a level of output at which price is $30, average total cost is $55, and average fixed cost is $40. The firm should

Accepted Answer

The answer of Suppose that a profit-maximizing monopolist has a...

Question 6

A monopolist which suffers losses in the short run will

Accepted Answer

The answer of A monopolist which suffers losses in the...

Question 7

A profit-maximizing firm with market power will always produce a level of output where

Accepted Answer

The answer of A profit-maximizing firm with market power will...

Question 8

A monopolist will maximize profit by producing the level of output at which

Accepted Answer

The answer of A monopolist will maximize profit by producing...

Question 9

Refer to the following figure:
  
The figure above shows the demand and cost curves facing a price-setting firm.
-At what output is marginal revenue $20?

Accepted Answer

To find the output at which marginal revenue is $20, we need to find the point on the demand curve where the slope (or marginal revenue) equals $20. From the graph, we can see that the point where the slope of the demand curve is $20 is at an output of 200 units. Therefore, the answer is B.

As for the best choice, we need to maximize profit. This occurs where marginal revenue equals marginal cost (MR=MC). From the graph, we can see that this occurs at an output of 300 units. At this output, the firm can charge a price of $60, which is greater than both average total cost and marginal cost. Therefore, the best choice is to produce and sell 300 units.

Question 10

Refer to the following figure:
  
The above graph shows the demand and cost conditions facing a price-setting firm.
-What is the maximum amount of profit the firm can earn?

Accepted Answer

The best choice for the firm is to set a price of $10, which results in a quantity demanded of 15 units. At this point, the firm's marginal cost is equal to its marginal revenue, resulting in a profit of $80 ($150 in revenue - $70 in total costs). Any other price will result in a lower profit.

Question 11

Refer to the following table which gives the demand and cost data for a price-setting firm:
 $$\begin{array} { c c c } 
\text { Price } & \text { Dutput } & \text { Tatal Cost } \
\hline \$ 20 & 7 & \mathbf { 3 6 } \
19 & \mathbf { 8 } & 45 \
1 \mathbf { 9 } & \mathbf { 9 } & \mathbf { 5 4 } \
17 & 10 & \mathbf { 6 3 } \
16 & 11 & 72 \
15 & 12 & \mathbf { 8 1 }
\end{array}$$
-What is the maximum amount of profit that this firm can earn?

Accepted Answer

The answer of Refer to the following table which gives...

Question 12

A monopolist is producing a level of output at which price is $65, marginal revenue is $35, average total cost is $35, and marginal cost is $50. In order to maximize profit, the firm should

Accepted Answer

To maximize profit, a monopolist should produce at the quantity where marginal revenue equals marginal cost. In this case, the marginal cost is $50, which is greater than the marginal revenue of $35. Therefore, the firm is producing too much and should reduce output.

Option A is incorrect because keeping output the same would result in losses as the marginal cost exceeds the marginal revenue.

Option C is also incorrect because increasing output would further lower marginal revenue and reduce profits.

Option D is not applicable because decreasing price would further reduce profits.

Option E is incorrect because producing more is not the correct choice for profit maximization in this case.

Question 13

A firm with market power will maximize profit by hiring the amount of an input at which the

Accepted Answer

A firm with market power will maximize profit by hiring the amount of an input at which the marginal revenue product (MRP) of the last unit of the input hired equals its marginal cost (MC). This is equivalent to saying that the last unit of the input hired adds the same amount to total revenue (through its contribution to output and thus sales) as it adds to total cost.

Question 14

Refer to the following figure:
  
The figure above shows the demand and cost curves facing a price-setting firm.
-In profit-maximizing (or loss-minimizing) equilibrium, the price-setting firm earns $______ in total revenue, which is ___________ the maximum possible total revenue of $________.

Accepted Answer

In profit-maximizing equilibrium, a firm may earn less than the maximum possible total revenue because it sets prices to maximize profit, not revenue. Here, $7,500 is less than the maximum possible total revenue of $8,000.

Question 15

Refer to the following table which gives the demand and cost data for a price-setting firm:
 $$\begin{array} { c c c } 
\text { Price } & \text { Dutput } & \text { Tatal Cost } \
\hline \$ 20 & 7 & \mathbf { 3 6 } \
19 & \mathbf { 8 } & 45 \
1 \mathbf { 9 } & \mathbf { 9 } & \mathbf { 5 4 } \
17 & 10 & \mathbf { 6 3 } \
16 & 11 & 72 \
15 & 12 & \mathbf { 8 1 }
\end{array}$$
-What is the profit-maximizing price?

Accepted Answer

The answer of Refer to the following table which gives...

Question 16

Refer to the following:
Columns 1 and 2 make up a portion of a monopolist's production function for a single variable input, labor. Columns 2 and 3 represent the demand function facing the monopolist over this range of output:
 $$\begin{array} { c c c } 
(1)& \text { (2) } & \text { (1) } \
\hline \text { Undsar Labor } & \text { Unds of Oupud } & \text { Price } \
\hline 3 & 370 & \$ 10 \
4 & 490 & 9 \
5 & 570 & 8 \
6 & 600 & 7 \
7 & 670 & 6
\end{array}$$
-If the monopolist faces a fixed wage rate of $300, how many units of labor will the firm employ?

Accepted Answer

The monopolist will employ 4 units of labor because at that level of employment, the marginal revenue product of labor ($9) is equal to the wage rate ($300).

Question 17

Refer to the following:
Columns 1 and 2 make up a portion of a monopolist's production function for a single variable input, labor. Columns 2 and 3 represent the demand function facing the monopolist over this range of output:
 $$\begin{array} { c c c } 
(1)& \text { (2) } & \text { (1) } \
\hline \text { Undsar Labor } & \text { Unds of Oupud } & \text { Price } \
\hline 3 & 370 & \$ 10 \
4 & 490 & 9 \
5 & 570 & 8 \
6 & 600 & 7 \
7 & 670 & 6
\end{array}$$
-If an increase in consumers' income increases product price by $2 at each level of output, how many units of labor will the firm employ at a wage rate of $300?

Accepted Answer

To determine the optimal number of labor units, calculate the marginal revenue product (MRP) for each labor unit and compare it to the wage rate. With the price increase, the new prices are $12, $11, $10, $9, and $8. Calculate MRP for each labor unit and find where MRP equals the wage rate of $300. The firm will employ 5 units of labor, as the MRP for the 5th unit is closest to $300.

Question 18

A monopolist is currently hiring 5,000 units of labor. At this level, the marginal revenue of output is $10, the (fixed) wage rate is $300, and the marginal product of labor is 50. In order to maximize profit, the firm should

Accepted Answer

The answer of A monopolist is currently hiring 5,000 units...

Question 19

Refer to the following figure:
  
The figure above shows the demand and cost curves facing a price-setting firm.
-The profit-maximizing (or loss-minimizing) level of output is

Accepted Answer

The profit-maximizing (or loss-minimizing) level of output is where marginal revenue (MR) equals marginal cost (MC). From the graph, at an output level of 300, MR intersects with MC. At this output level, the firm is earning zero economic profit (or breaking even), but it is the best choice given the options provided. Option A is not the correct answer because at an output of 100, the marginal cost (MC) is above the marginal revenue (MR), and therefore the firm is incurring economic losses. Option B is not the correct answer because at an output of 200, the marginal cost (MC) is still above the marginal revenue (MR), and therefore the firm is still incurring economic losses. Option D is not the correct answer because at an output of 400, the marginal cost (MC) is below the marginal revenue (MR), and therefore the firm is earning positive economic profits, and producing more than they need to be efficient. Option E is not the correct answer because at an output of 450, the marginal cost (MC) is above the marginal revenue (MR), and therefore the firm is incurring economic losses.

Question 20

A firm facing a downward sloping demand curve is producing a level of output at which price is $7, marginal revenue is $5, and average total cost, which is at its minimum value, is $3. In order to maximize profit, the firm should

Accepted Answer

The answer of A firm facing a downward sloping demand...

Quiz 12: Managerial Decisions for Firms With Market Power

Refer to the following figure: The figure above shows the demand and cost curves facing a price-setting firm. -What is marginal revenue when output is 100 units?

Which of the following is true of a monopolist in the long run?

A firm with market power is producing a level of output at which price is $8, marginal revenue is $5, average variable cost is $6, and marginal cost is $10. In order to maximize profit, the firm should

Suppose that a profit-maximizing monopolist has a plant of the optimal size and is producing a level of output at which price is $30, average total cost is $55, and average fixed cost is $40. The firm should

A monopolist which suffers losses in the short run will

A profit-maximizing firm with market power will always produce a level of output where

A monopolist will maximize profit by producing the level of output at which

Refer to the following figure: The figure above shows the demand and cost curves facing a price-setting firm. -At what output is marginal revenue $20?

Refer to the following figure: The above graph shows the demand and cost conditions facing a price-setting firm. -What is the maximum amount of profit the firm can earn?

A monopolist is producing a level of output at which price is $65, marginal revenue is $35, average total cost is $35, and marginal cost is $50. In order to maximize profit, the firm should

A firm with market power will maximize profit by hiring the amount of an input at which the

Refer to the following figure: The figure above shows the demand and cost curves facing a price-setting firm. -In profit-maximizing (or loss-minimizing) equilibrium, the price-setting firm earns $ in total revenue, which is _ the maximum possible total revenue of $____.

A monopolist is currently hiring 5,000 units of labor. At this level, the marginal revenue of output is $10, the (fixed) wage rate is $300, and the marginal product of labor is 50. In order to maximize profit, the firm should

Refer to the following figure: The figure above shows the demand and cost curves facing a price-setting firm. -The profit-maximizing (or loss-minimizing) level of output is

A firm facing a downward sloping demand curve is producing a level of output at which price is $7, marginal revenue is $5, and average total cost, which is at its minimum value, is $3. In order to maximize profit, the firm should

Quiz 12: Managerial Decisions for Firms With Market Power

Refer to the following figure: The figure above shows the demand and cost curves facing a price-setting firm. -What is marginal revenue when output is 100 units?

Which of the following is true of a monopolist in the long run?

A firm with market power is producing a level of output at which price is $8, marginal revenue is $5, average variable cost is $6, and marginal cost is $10. In order to maximize profit, the firm should

Suppose that a profit-maximizing monopolist has a plant of the optimal size and is producing a level of output at which price is $30, average total cost is $55, and average fixed cost is $40. The firm should

A monopolist which suffers losses in the short run will

A profit-maximizing firm with market power will always produce a level of output where

A monopolist will maximize profit by producing the level of output at which

Refer to the following figure: The figure above shows the demand and cost curves facing a price-setting firm. -At what output is marginal revenue $20?

Refer to the following figure: The above graph shows the demand and cost conditions facing a price-setting firm. -What is the maximum amount of profit the firm can earn?

A monopolist is producing a level of output at which price is $65, marginal revenue is $35, average total cost is $35, and marginal cost is $50. In order to maximize profit, the firm should

A firm with market power will maximize profit by hiring the amount of an input at which the

Refer to the following figure: The figure above shows the demand and cost curves facing a price-setting firm. -In profit-maximizing (or loss-minimizing) equilibrium, the price-setting firm earns $______ in total revenue, which is ___________ the maximum possible total revenue of $________.

A monopolist is currently hiring 5,000 units of labor. At this level, the marginal revenue of output is $10, the (fixed) wage rate is $300, and the marginal product of labor is 50. In order to maximize profit, the firm should

Refer to the following figure: The figure above shows the demand and cost curves facing a price-setting firm. -The profit-maximizing (or loss-minimizing) level of output is

A firm facing a downward sloping demand curve is producing a level of output at which price is $7, marginal revenue is $5, and average total cost, which is at its minimum value, is $3. In order to maximize profit, the firm should

Refer to the following figure: The figure above shows the demand and cost curves facing a price-setting firm. -In profit-maximizing (or loss-minimizing) equilibrium, the price-setting firm earns $ in total revenue, which is _ the maximum possible total revenue of $____.