Question 1

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its

Accepted Answer

In a monopoly, the firm is the only seller of the product and therefore faces the market demand curve, which is downward sloping. In order to sell more units of the product, the firm must lower the price of the product, which in turn decreases the revenue earned from each additional unit sold. As a result, the marginal revenue (MR) is less than the price of the product. This is because the firm must lower the price on all units sold (not just the additional unit) in order to sell the additional unit, which decreases the overall revenue earned. The average revenue (AR) is also less than the price of the product because the firm is selling more units at a lower price, resulting in a lower revenue per unit sold. Therefore, the correct answer is C, where marginal revenue is less than the price of the product.

Question 2

For a monopoly firm, the shape and position of the demand curve play a role in determining the (i)
Profit-maximizing price.(ii)
Shape and position of the marginal-cost curve.(iii)
Shape and position of the marginal-revenue curve.

Accepted Answer

The profit-maximizing price is determined by the intersection of the marginal-revenue and marginal-cost curves. The shape and position of the marginal-revenue curve are determined by the shape and position of the demand curve, while the shape and position of the marginal-cost curve are determined by the costs of production. Therefore, both (i) and (iii) are influenced by the shape and position of the demand curve, but (ii) is not. Thus, the correct choice is (i) and (iii) only, which is option C.

Question 3

For a monopoly, the level of output at which marginal revenue equals zero is also the level of output at which

Accepted Answer

When marginal revenue equals zero, any additional unit of output does not increase total revenue, indicating that total revenue is maximized at this level of output.

Question 4

Which of the following is not a difference between monopolies and perfectly competitive markets?

Accepted Answer

Both monopolies and perfectly competitive firms choose to produce the quantity at which marginal revenue equals marginal cost. The difference lies in the nature of marginal revenue and demand curves they face.

Question 5

Which of the following statements is correct for a monopolist? (i)
The firm maximizes profits by equating marginal revenue with marginal cost.
(ii)
The firm maximizes profits by equating price with marginal cost.
(iii)
Demand equals marginal revenue.(iv)
Average revenue equals price.

Accepted Answer

A monopolist maximizes profits by producing where marginal revenue is equal to marginal cost (i), but it does not necessarily equate price with marginal cost (ii). Demand does not necessarily equal marginal revenue for a monopolist, as they have the ability to set the price above marginal revenue (iii). However, average revenue does equal price for a monopolist, as they are the sole seller in the market (iv). Therefore, the correct statement for a monopolist is (i) and (iv) only.

Question 6

Suppose a firm has a monopoly on the sale of widgets and faces a downward-sloping demand curve. When selling the 100^th widget, the firm will always receive

Accepted Answer

Marginal revenue is the change in total revenue from selling one more unit of output. As the demand curve is downward-sloping, the price of each additional unit sold must be lower than the price of the previous unit. Therefore, the marginal revenue from selling the 100th widget will be less than the marginal revenue from selling the 99th widget.

Question 7

In a market characterized by monopoly, the market demand curve is

Accepted Answer

In a market characterized by monopoly, the monopolist controls the entire market supply and sets the price at which they are willing to sell the product. As a result, the demand curve faced by the monopolist is downward sloping, meaning that as the price increases, the quantity demanded by consumers decreases. This is because consumers are willing to pay less for additional units of the product, and the monopolist must lower the price to sell more units.

Question 8

When a monopolist reduces the quantity of output it produces and sells, the

Accepted Answer

When a monopolist reduces the quantity of output it produces and sells, the market becomes tighter with a lower supply of goods, leading to an increase in the price of its output. This is because the demand for the product remains constant or may even increase due to a lack of substitute products. As a result, the monopolist can earn higher profits by selling a lower quantity of output at a higher price.

Question 9

For a monopoly firm,

Accepted Answer

In a monopoly, price exceeds marginal revenue, and price equals average revenue. Not all price-quantity combinations maximize profits; the firm maximizes profit where marginal cost equals marginal revenue.

Question 10

Because many good substitutes exist for a competitive firm's product, the demand curve that it faces is

Accepted Answer

If many good substitutes exist for a competitive firm's product, consumers have many options to switch between substitutes, and will be very responsive to small changes in price. Therefore, the demand curve that the firm faces will be completely horizontal, or perfectly elastic. Even a small increase in price will cause consumers to switch to a substitute, resulting in the firm losing all its customers.

Question 11

Competitive firms have

Accepted Answer

Competitive firms face horizontal demand curves because they are price takers and can sell as much output as they desire at the market price.

Question 12

When a monopolist increases the amount of output that it produces and sells, average revenue

Accepted Answer

In a monopolistic market, when a monopolist increases output, the average revenue (price) decreases due to the downward-sloping demand curve. Additionally, marginal revenue decreases at a faster rate than the average revenue because to sell more units, the monopolist must lower the price not just for the additional units but for all units sold, which impacts the marginal revenue more significantly.

Question 13

As a monopolist increases the quantity of output it sells, the price consumers are willing to pay for the good

Accepted Answer

As a monopolist increases the quantity of output it sells, the overall market supply increases, which in turn decreases the price. Therefore, the price consumers are willing to pay for the good decreases.

Question 14

Suppose a firm has a monopoly on the sale of a computer game and faces a downward-sloping demand curve. When selling the 50^th game, the firm will always receive

Accepted Answer

The answer of Suppose a firm has a monopoly on...

Question 15

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

Accepted Answer

The answer of The profit-maximization problem for a monopolist differs...

Question 16

Competitive firms differ from monopolies in which of the following ways? (i)
Competitive firms do not have to worry about the price effect lowering their total revenue.(ii)
Marginal revenue for a competitive firm equals price, while marginal revenue for a monopoly is less than the price it is able to charge.(iii)
Monopolies must lower their price in order to sell more of their product, while competitive firms do not.

Accepted Answer

Competitive firms do not experience a price effect because they are price takers, so their total revenue is not affected by the price they charge. Marginal revenue equals price for competitive firms, while for monopolies, marginal revenue is less than the price due to the downward-sloping demand curve. Monopolies must lower prices to sell more, unlike competitive firms.

Question 17

For a monopoly firm, which of the following equalities is always true?

Accepted Answer

The answer of For a monopoly firm, which of the...

Question 18

Which of the following statements is correct?

Accepted Answer

A competitive firm faces a horizontal demand curve because it has no power to influence the market price and must accept the price determined by the market. A monopolist, on the other hand, faces a downward-sloping demand curve because it has the ability to influence the price by adjusting the quantity of output it produces. As the monopolist increases output, the price decreases, causing the quantity demanded to increase but not enough to offset the decrease in price.

Question 19

A monopolist's average revenue is always

Accepted Answer

In a monopolist market, the firm is the only supplier of the product, so the demand curve is the market demand curve. Therefore, to sell more units of the product, the monopolist must lower the price of the product. The price is determined by the point on the demand curve where the quantity demanded equals the quantity supplied by the firm. The average revenue is the total revenue divided by the quantity sold. Since the price remains constant for each unit sold, the average revenue is equal to the price of the product.

Question 20

For a monopoly firm,

Accepted Answer

In a monopoly, the firm is the only supplier of a product or service, giving it the power to set the price. The firm's goal is to maximize profits, so it will produce and sell the quantity where marginal revenue equals marginal cost. Since the demand curve is downward sloping, the firm must lower the price in order to sell more units. This means that the price will always be less than or equal to the average revenue, and may be less than marginal revenue if the demand curve is highly elastic. However, the firm will want to produce and sell the quantity where marginal revenue equals marginal cost, which is where it is maximizing profits. Therefore, choice B is correct.

Quiz 15: Monopoly

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its

For a monopoly firm, the shape and position of the demand curve play a role in determining the (i) Profit-maximizing price.(ii) Shape and position of the marginal-cost curve.(iii) Shape and position of the marginal-revenue curve.

For a monopoly, the level of output at which marginal revenue equals zero is also the level of output at which

Which of the following is not a difference between monopolies and perfectly competitive markets?

Which of the following statements is correct for a monopolist? (i) The firm maximizes profits by equating marginal revenue with marginal cost. (ii) The firm maximizes profits by equating price with marginal cost. (iii) Demand equals marginal revenue.(iv) Average revenue equals price.

Suppose a firm has a monopoly on the sale of widgets and faces a downward-sloping demand curve. When selling the 100th widget, the firm will always receive

In a market characterized by monopoly, the market demand curve is

When a monopolist reduces the quantity of output it produces and sells, the

For a monopoly firm,

Because many good substitutes exist for a competitive firm's product, the demand curve that it faces is

Competitive firms have

When a monopolist increases the amount of output that it produces and sells, average revenue

As a monopolist increases the quantity of output it sells, the price consumers are willing to pay for the good

Suppose a firm has a monopoly on the sale of a computer game and faces a downward-sloping demand curve. When selling the 50th game, the firm will always receive

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

For a monopoly firm, which of the following equalities is always true?

Which of the following statements is correct?

A monopolist's average revenue is always

For a monopoly firm,

Suppose a firm has a monopoly on the sale of widgets and faces a downward-sloping demand curve. When selling the 100^th widget, the firm will always receive

Suppose a firm has a monopoly on the sale of a computer game and faces a downward-sloping demand curve. When selling the 50^th game, the firm will always receive