Question 1

An important difference between perfect competition and monopoly is

Accepted Answer

The biggest difference between perfect competition and monopoly is the shape of the demand curve faced by each. In perfect competition, the demand curve faced by a firm is horizontal, meaning that the firm can sell as much as it wants at the market price without affecting the price. In contrast, a monopoly faces a downward sloping demand curve, meaning that it can only sell more at a lower price. This gives the monopoly some pricing power and allows it to charge a higher price than in a perfectly competitive market.

Question 2

-Refer to the above figure.Which of the following statements is true about the demand curves for an individual firm in a perfectly competitive industry and a monopoly?

Accepted Answer

The answer of 
-Refer to the above figure.Which of the...

Question 3

If a monopolist lowers its price,

Accepted Answer

When a monopolist lowers its price, the quantity demanded by consumers increases. This is because as the price decreases, more consumers are able and willing to purchase the product. However, it is important to note that lowering the price may also invite new competitors to enter the market, thus potentially decreasing the monopolist's market power.

Question 4

For a firm facing a downward sloping demand curve,marginal revenue

Accepted Answer

Marginal revenue is greater at higher prices than at lower prices for a firm facing a downward sloping demand curve because as price decreases, the additional revenue gained from selling one more unit (marginal revenue) decreases due to the price effect outweighing the volume effect.

Question 5

If a monopolist wants to increase the amount it sells,it

Accepted Answer

In order for a monopolist to increase the amount it sells, it must lower the price on all units. This is because, as the only seller in the market, the monopolist has control over the price and can manipulate it to increase demand. By lowering the price, more consumers are willing to purchase the product, resulting in an increase in quantity sold. However, this also means that the monopolist will be earning less profit per unit, which they must accept as a tradeoff. Keeping the price the same or lowering the cost of production may not necessarily result in an increase in quantity sold.

Question 6

A monopolist faces

Accepted Answer

A monopolist faces the market demand curve, which represents the total demand for the product in the market. The monopolist has the power to set the price because there are no close substitutes for the product. The demand curve is downward sloping, indicating that as the price of the product increases, the quantity demanded by consumers decreases. The monopolist can choose the optimal price and quantity combination to maximize profits based on the market demand curve.

Question 7

A monopolist wishing to increase its profit has just discovered that lowering its price and selling more output yielded the desired result.Profit increased.Based on this,we can conclude that the cost of the additional production is

Accepted Answer

If the monopolist is able to increase profit by selling more output at a lower price, it means that the additional revenue earned from the additional production is greater than the cost of producing that additional output. This implies that the cost of the additional production is less than the revenue from the additional production.

Question 8

For the monopolist,marginal revenue is

Accepted Answer

A monopolist faces a downward sloping demand curve, and to sell an additional unit of output, they must lower the price for all units sold. As a result, marginal revenue (the change in total revenue from producing and selling one additional unit of output) will always be less than the price.

Question 9

If a monopolist raises its price,

Accepted Answer

When a monopolist raises its price, the quantity demanded decreases. This is because there are no close substitutes available in the market and consumers are willing to pay a higher price up to a certain limit. However, as the price increases beyond that limit, the demand for the product decreases as consumers start looking for alternatives or reduce their overall consumption.

Question 10

Which of the following is not true about the demand curve faced by a monopolist?

Accepted Answer

A monopolist's demand curve is downward sloping, but it is not perfectly elastic. In a perfectly competitive market, the demand curve faced by a firm is perfectly elastic because it can sell any quantity at the market price. However, a monopolist must reduce the price to sell more units, so its demand curve is downward sloping but not perfectly elastic.

Question 11

To induce an increase in the quantity demanded of its product,a monopolist must reduce the

Accepted Answer

According to the law of demand, an increase in the price of a product leads to a decrease in the quantity demanded, and a decrease in price leads to an increase in the quantity demanded. Therefore, a monopolist can induce an increase in the quantity demanded of its product by reducing the price of its product, which generates a rightward movement along its demand curve.

Question 12

If a firm sells 5 units of output at $10 per unit and 6 units of output when price is reduced to $9,its marginal revenue from selling the sixth unit is

Accepted Answer

The answer of If a firm sells 5 units of...

Question 13

The demand curve facing a monopolist is

Accepted Answer

A monopolist has the power to control the market price and can charge a higher price than a perfectly competitive market. As a result, the demand curve facing a monopolist is downward sloping. If the monopolist wants to sell more units, they need to lower the price because the quantity demanded increases as the price decreases.

Question 14

Successive downward movements along the demand curve for the product of a monopolist always generate successive

Accepted Answer

Successive downward movements along the demand curve for the product of a monopolist will result in a decrease in the price charged for the product. As a monopolist lowers its price to sell more units, the additional revenue generated by selling each unit will decrease. Therefore, successive downward movements along the demand curve will result in successive decreases in the additional per-unit revenues earned by the monopolist.

Question 15

Which of the following statements is TRUE about the relationship between a firm's demand curve under perfect competition and monopoly?

Accepted Answer

Under perfect competition, the demand curve is perfectly elastic because the firm is a price taker and any increase in price will result in all consumers buying from other firms. Under monopoly, the demand curve has elastic, unit-elastic, and inelastic portions because the firm has the power to set prices, which affects the quantity demanded by consumers. As the price increases, demand becomes more elastic, eventually reaching a unit-elastic point where the increase in price is exactly offset by the decrease in quantity demanded. At even higher prices, demand becomes inelastic, where the increase in price is not offset by a significant decrease in quantity demanded.

Question 16

The monopolist's marginal revenue is less than price since

Accepted Answer

A monopolist's marginal revenue is less than price because in order to sell additional units, the price must be lowered on all units sold. This is because the monopolist is the sole producer and has market power to set prices above marginal cost. Therefore, the demand for its product is downward sloping, and prices must be lowered to sell more units, resulting in a decrease in marginal revenue.

Question 17

For a monopolist,the marginal revenue gained when one more unit of output is sold is

Accepted Answer

A monopolist faces a downward-sloping demand curve, which means that in order to sell one more unit of output, the monopolist must lower the price on all units sold. This results in a loss in revenue on the previously sold units, which must be subtracted from the price of the extra unit sold in order to calculate the marginal revenue gained. Therefore, the correct answer is A.

Question 18

For a monopolist,

Accepted Answer

The monopolist faces a downward sloping demand curve, meaning the monopolist can only increase its output by decreasing the price. Therefore, the marginal revenue earned by the monopolist on the additional unit is lower than the previous unit. So, the statement "marginal revenue is less than price" is correct for a monopolist.

Question 19

If a firm sells 10 units of output at $100 per unit and 11 units of output when price is reduced to $99,its marginal revenue for the last unit sold is

Accepted Answer

Marginal revenue is the additional revenue received from selling one more unit of output.

When the firm sells 10 units at $100 per unit, its total revenue is 10 x $100 = $1000.

When the price is reduced to $99, the firm sells 11 units and its total revenue is 11 x $99 = $1089.

The additional revenue from selling the 11th unit is $1089 - $1000 = $89.

Therefore, the marginal revenue for the last unit sold is $89, which corresponds to choice D.

Question 20

If a firm sells 20 units of output at $15 per unit and 21 units of output when price is reduced to $14,its marginal revenue from selling the last unit is

Accepted Answer

The answer of If a firm sells 20 units of...

Quiz 11: Monopoly