Question 1

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

The answer of Stereo Sound Unlimited has a monopoly over...

Question 2

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

A monopolist like The Lend Me Your Ears Company will find it profitable to increase production as long as the additional revenue gained from selling one more unit (marginal revenue) is greater than the additional cost of producing that unit (marginal cost).

Question 3

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 generated from selling one more unit of a good or service. It is calculated by subtracting the total revenue before the sale of the extra unit from the total revenue after the sale of the extra unit. In this case, the total revenue increased from $30,000 to $30,800 with the sale of the twenty-first sound system, so the marginal revenue is $30,800 - $30,000 = $800.

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. 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

The marginal revenue for the 21st system is $3,800 ($33,800 - $30,000), while the price of the 21st system is $3,800. In a monopoly, the price is greater than the marginal revenue due to the downward-sloping demand curve.

Question 6

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 monopolistic market, the marginal revenue decreases as the quantity sold increases because the monopolist must lower the price to sell additional units, leading to a marginal revenue less than the price of the last unit sold.

Question 7

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 8

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 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

For a monopolist, marginal revenue ________ price.

Accepted Answer

For a monopolist, marginal revenue is less than price because as they sell more units, they must lower the price on all units sold to sell an additional unit, which causes marginal revenue to fall below the price.

Question 11

A monopolist will ________ if marginal revenue is negative.

Accepted Answer

A monopolist will not produce if marginal revenue is negative because it indicates that producing additional units would decrease total revenue, making it unprofitable to continue production.

Question 12

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

Accepted Answer

A monopolist maximizes profits by producing at the quantity where marginal revenue equals marginal cost. This is a fundamental principle of microeconomics.

Question 13

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

The total revenue from selling three units is $690, so the price per unit is $690 divided by 3, which equals $230.

Question 14

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

Accepted Answer

A monopolistic firm faces a continuously downward-sloping demand curve because it has some degree of market power, allowing it to set prices above marginal cost. Unlike in perfect competition, where firms are price takers and face a horizontal demand curve, a monopolist can influence the market price of its product.

Question 15

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 16

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 17

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

A monopolist like The Lend Me Your Ears Company will find it profitable to reduce output when marginal cost (MC) is greater than marginal revenue (MR) because producing additional units would cost more than the revenue generated from selling those units, thus reducing overall profit.

Question 18

The marginal revenue curve for a monopolist is

Accepted Answer

The marginal revenue curve for a monopolist is downward sloping because, to sell additional units, the monopolist must lower the price, which affects the revenue generated from all units sold, not just the additional unit.

Question 19

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

Accepted Answer

Marginal revenue is positive if total revenue increases as output increases, because marginal revenue measures the change in total revenue from selling one more unit of a good or service.

Question 20

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

When the monopolist increases sales from two to three units, total revenue increases from $150 to $180, indicating that the third unit is sold for $30 more ($180 - $150 = $30). Since total revenue for three units is $180, the price per unit when selling three units is $180 / 3 = $60.

Quiz 13: Monopoly and Antitrust Policy