Question 1

The Lend Me Your Ears Company monopolizes the production of a specialized hearing aid. The Lend Me Your Ears Company will find it profitable to increase the production of the hearing aids as long as marginal revenue is

Accepted Answer

The Lend Me Your Ears Company will only find it profitable to increase production if the marginal revenue from each additional unit sold is greater than the marginal cost of producing that unit. Therefore, the correct answer is C, as long as marginal revenue is greater than marginal cost.

Question 2

A monopolist's price equals its ________ only when output is zero.

Accepted Answer

A monopolist's price equals its marginal revenue only when output is zero because at zero output, no sales are made, and thus, the price at which the next unit could be sold (marginal revenue) is essentially the price of the product itself.

Question 3

A monopolist ________ when its marginal revenue is zero.

Accepted Answer

A monopolist maximizes total revenue when its marginal revenue is zero, as this is the point where any additional unit sold does not change total revenue.

Question 4

When a demand curve is a downward sloping straight line, the slope of the demand curve is ________ the marginal revenue curve.

Accepted Answer

When a demand curve is a downward sloping straight line, the marginal revenue curve has the same intercept as the demand curve but is twice as steep. This is because the marginal revenue takes into account the effect of lowering the price on all units sold, not just the additional unit.

Question 5

Hi Phi Sound Unlimited has a monopoly over the installation of surround sound systems. If Hi Phi Unlimitedʹs total revenue from installing 20 sound systems is $30,000 and its total revenue from installing 21 sound systems is $30,800, what is the marginal revenue of the twenty-first sound system?

Accepted Answer

Marginal revenue is the additional revenue gained from selling one more unit. To find the marginal revenue of the twenty-first sound system, we need to calculate the difference in total revenue between installing 21 sound systems and installing 20 sound systems. 
Total revenue for 20 sound systems = $30,000
Total revenue for 21 sound systems = $30,800
Marginal revenue of the 21st sound system = Total revenue for 21 sound systems - Total revenue for 20 sound systems 
= $30,800 - $30,000 
= $800
Therefore, the answer is C, $800.

Question 6

When a monopolist sells two units of output its total revenue is $600. When a monopolist sells three units of output its total revenue is $690. In order to sell three units of output instead of only two, the monopolist must

Accepted Answer

The answer of When a monopolist sells two units of...

Question 7

For a monopolist, if total revenue increases as output increases, then marginal revenue is

Accepted Answer

If total revenue increases as output increases, then marginal revenue must be positive. This is because when MR is positive, producing one more unit will add more to total revenue than it subtracts from the revenue gained on all previous units produced. If MR were negative, the additional unit would decrease total revenue, and if MR were zero, producing an additional unit would neither add to nor subtract from total revenue.

Question 8

The shape of a monopolist's ________ schedule is a curve bowed out from the quantity (horizontal) axis.

Accepted Answer

The answer of The shape of a monopolist's ________ schedule...

Question 9

When the demand curve is a downward sloping straight line, the quantity at which the marginal revenue curve intersects the horizontal (quantity) axis is ________ the quantity at which the demand curve intersects the horizontal (quantity) axis.

Accepted Answer

When the demand curve is a downward sloping straight line, the marginal revenue curve also slopes downward but at twice the rate of the demand curve. This means that the marginal revenue curve intersects the horizontal axis at half the quantity at which the demand curve intersects the horizontal axis.

Question 10

When a monopolist sells two units of output its total revenue is $150. When it sells three units of output its total revenue, is $180. When the monopolist sells three units of output, the price per unit is

Accepted Answer

To find the price per unit when the monopolist sells three units of output, we can use the formula:

Price x Quantity = Total Revenue

Let's call the price per unit "P":

- When the monopolist sells two units of output: 2P = 150
- When the monopolist sells three units of output: 3P = 180

Solving for P in the first equation, we get:

P = 150/2 = 75

Substituting P = 75 into the second equation, we get:

3(75) = 180

225 = 180

This is not true, so our initial assumption that P = 75 is incorrect. Let's try solving for P using the second equation:

P = 180/3 = 60

Substituting P = 60 into the first equation, we get:

2(60) = 150

120 = 150

This is also not true, so our initial assumption that P = 60 is also incorrect. However, we can still use the information we have to answer the question.

We know that when the monopolist sells three units of output, its total revenue is $180. We also know that the monopolist sold two units of output at a price of $75 each, for a total revenue of $150. This means that when the monopolist sold the third unit, it must have sold it at a price that allowed it to earn $30 of additional revenue.

Since the monopolist cannot charge a different price for each unit of output, it must have charged the same price for all three units. Therefore, the price per unit when the monopolist sells three units of output must be:

($150 + $30) / 3 = $60.

So the answer is B) $60.

Question 11

When a monopolist sells two units of output its total revenue is $600. When a monopolist sells three units of output its total revenue is $690. When the monopolist sells three units of output, the price per unit is

Accepted Answer

To find the price per unit when the monopolist sells three units of output, we need to use the formula for total revenue:

TR = P x Q

Where TR is total revenue, P is price, and Q is quantity.

We are given that when the monopolist sells two units of output, total revenue is $600:

$600 = P x 2

Dividing both sides by 2, we get:

P = $300

We are also given that when the monopolist sells three units of output, total revenue is $690:

$690 = P x 3

Dividing both sides by 3, we get:

P = $230

Therefore, the price per unit when the monopolist sells three units of output is $230, which is answer B.

Question 12

The Smiling Lizard Company has a monopoly in the sale of iguanas in Florida. When the Smiling Lizard Company sells ten iguanas its marginal revenue is $50. When the Smiling lizard Company sells eleven iguanas its marginal revenue will be

Accepted Answer

In a monopoly market, the marginal revenue is always less than the price of the good. This means that as the quantity sold increases, marginal revenue will decrease. Therefore, if the Smiling Lizard Company's marginal revenue for selling ten iguanas is $50, it will be less than $50 when selling eleven iguanas.

Question 13

A monopolistic firm faces a continuously downward-sloping ________ curve.

Accepted Answer

In a monopolistic market, the firm has the ability to set its own price due to the absence of close substitutes. As a result, the demand curve faced by the firm is continuously downward sloping, as the higher the price charged, the fewer units of the good or service will be demanded.

Question 14

Hi Phi Sound Unlimited has a monopoly over the installation of surround sound systems. Hi Phi Unlimitedʹs total revenue from installing 20 sound systems is $30,000 and its total revenue from installing 21 sound systems is $33,800. The price of the 21st sound system is ________ the marginal revenue of that system.

Accepted Answer

Since Hi Phi has a monopoly over the installation of surround sound systems, it can control the price and quantity sold. To find the price of the 21st sound system, we need to calculate the marginal revenue (MR) of that system.

Total revenue for installing 20 sound systems = $30,000 
Total revenue for installing 21 sound systems = $33,800

Therefore, the revenue from installing the 21st system = $33,800 - $30,000 = $3,800.

Now, to find MR, we need to find the change in revenue when the quantity changes by 1 (i.e., from installing 20 systems to installing 21 systems).

Change in quantity = 21 - 20 = 1 
Change in total revenue = $3,800

Therefore, MR = Change in total revenue / Change in quantity = $3,800 / 1 = $3,800.

The price of the 21st system is greater than its MR since the MR is the additional revenue earned from selling one more unit. Hence, the best choice is B.

Question 15

Stereo Sound Unlimited has a monopoly over the installation of surround sound systems. If Stereo Sound Unlimitedʹs total revenue from installing 10 sound systems is $20,000 and its total revenue from installing 11 sound systems is $19,000, what is the marginal revenue of the eleventh sound system?

Accepted Answer

Marginal revenue is the additional revenue earned by selling one more unit. In this case, the eleventh sound system resulted in a decrease in total revenue from $20,000 to $19,000. Therefore, the marginal revenue of the eleventh sound system is -$1,000. (Option B)

Question 16

A monopolist will ________ if marginal revenue is negative.

Accepted Answer

The answer of A monopolist will ________ if marginal revenue...

Question 17

When a monopolist is ________, it has equated marginal revenue and marginal cost.

Accepted Answer

A monopolist maximizes profits by producing where marginal revenue (MR) equals marginal cost (MC). This will not necessarily result in producing efficiently or breaking even, as a monopolist has market power and can set prices higher than their production costs. Maximizing total revenue is not the same as maximizing profits.

Question 18

The marginal revenue curve for a monopolist is

Accepted Answer

The marginal revenue curve for a monopolist is downward sloping because in order to sell more units of output, the monopolist must lower the price for all units sold. This means that the additional revenue gained from selling an additional unit is less than the revenue gained from the previous unit sold. As a result, the marginal revenue curve is below the demand curve and slopes downward.

Question 19

For a monopolist, marginal revenue ________ price.

Accepted Answer

A monopolist faces a downward-sloping demand curve, meaning that in order to sell more units, the monopolist must lower the price of each unit. This means that the marginal revenue of each additional unit sold will be less than the price of the previous unit, as the price needed to sell the additional unit is lower. Therefore, marginal revenue is always less than price for a monopolist.

Question 20

The Lend Me Your Ears Company monopolizes the production of a specialized hearing aid. The Lend Me Your Ears Company will find it profitable to reduce output as long as marginal cost is

Accepted Answer

The Lend Me Your Ears Company will find it profitable to reduce output as long as marginal cost is greater than marginal revenue. This is because if marginal cost is greater than marginal revenue, producing one more unit will cost more than the revenue generated by selling it. Therefore, it is more profitable for the company to reduce output until marginal cost equals marginal revenue.

Quiz 13: Monopoly and Antitrust Policy