Question 1

Assuming the same cost structure, a competitive market produces ________ output at ________ prices than a monopoly market.
A) less; lower
B) more; lower
C) less; higher
D) more; higher

Accepted Answer

In a competitive market, there are many firms competing with each other, which drives the price down as each firm tries to undercut the others. This results in more output being produced at lower prices. In a monopoly market, there is only one firm, and they have the power to charge higher prices due to their lack of competition. Therefore, a competitive market produces more output at lower prices than a monopoly market with the same cost structure.

Question 2

When a monopolist decreases the price of its good, consumers:
A) buy the same amount of the good as before.
B) buy more.
C) buy less.
D) may buy more or less, depending on the price elasticity of demand.

Accepted Answer

The answer of When a monopolist decreases the price of...

Question 3

If the demand curve for a firm is a straight line with negative slope, which of the following is the shortcut to finding the MR?
A) The demand curve starts below the marginal revenue curve and cuts the marginal revenue curve halfway down its length.
B) The marginal revenue curve starts at the same point as the demand curve and has twice the slope of the demand curve.
C) The marginal revenue curve is parallel to the demand curve with the same slope.
D) The marginal revenue curve starts at the same point as the demand curve and has a slope of 0.

Accepted Answer

The shortcut to finding the MR for a firm with a straight line demand curve with negative slope is to double the slope of the demand curve, and start the MR curve at the same point as the demand curve. Therefore, option B is the correct answer.

Question 4

A firm with monopoly power is able to set a markup price that is:
A) lower than prices on similar goods sold by competitive firms.
B) the same as the prices on similar goods sold by competitive firms.
C) higher than prices on similar goods sold by competitive firms.
D) the maximum price all market participants will pay for similar goods.

Accepted Answer

A firm with monopoly power has the ability to restrict output and raise prices above the competitive level. It can charge higher prices than prices on similar goods sold by competitive firms because it does not face competition from other producers.

Question 5

To maximize profit, the monopolist increases output:
A) until it is using full manufacturing capacity.
B) until marginal cost is equal to marginal revenue.
C) to the same amount it would produce if the firm was competitive, but maximizes price.
D) as long as the marginal revenue curve is higher than the demand curve.

Accepted Answer

The monopolist will increase output until marginal cost is equal to marginal revenue because this is the point at which they will maximize profit. If they produce any more than this point, the cost of producing an additional unit will be higher than the revenue generated from selling it, resulting in a decrease in profit. Therefore, the monopolist will stop increasing output at the point where adding one more unit would result in a decrease in profit.

Question 6

In a graph showing a straight-line market demand curve, the marginal revenue curve is:
A) a straight line that begins at the same point as the demand curve on the y-axis but with twice the slope.
B) a straight line that begins at the origin but with twice the slope of the demand curve.
C) the same straight line as the demand curve.
D) There is not enough information to complete the statement.

Accepted Answer

The answer of In a graph showing a straight-line market...

Question 7

To maximize , a monopolist will produce the level of output where:
A) marginal revenue is equal to average cost.
B) average revenue is equal to marginal cost.
C) marginal revenue is equal to marginal cost.
D) average revenue is equal to average cost.

Accepted Answer

A monopolist will maximize profits by producing the quantity where marginal revenue equals marginal cost. This is because marginal revenue represents the change in revenue from selling one additional unit, while marginal cost represents the change in cost from producing one additional unit. Therefore, at the quantity where marginal revenue equals marginal cost, the monopolist is producing the optimal amount and any more or less would result in lower profits.

Question 8

Which statement is TRUE?
A) If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price per unit.
B) If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling fewer units at a higher price per unit.
C) When a monopolist produces where MR < MC it always earns a positive economic profit.
D) A monopolist is guaranteed monopoly profits by the government.

Accepted Answer

The answer of Which statement is TRUE?
A) If the monopolist's...

Question 9

Use the following to answer questions: Figure: Monopoly Profits 
-(Figure: Monopoly Profits) Refer to the figure. What is the monopolist's optimal price and output level?
A) P = $3.00; Q = 40
B) P = $16.50; Q = 40
C) P = $6.00; Q = 40
D) P = $6.00; Q = 80

Accepted Answer

The answer of Use the following to answer questions: Figure:...

Question 10

A monopolist can sell 300 units of output for $29.00 per unit. Alternatively, it can sell 301 units of output for $28.25 per unit. The marginal revenue of the 301st unit of output is:
A) -$196.75.
B) -$0.75.
C) $196.75.
D) $28.25.

Accepted Answer

The answer of A monopolist can sell 300 units of...

Question 11

Use the following to answer questions: Table: Profit-Maximizing Monopolist $$\begin{array} { c c c c c c c } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { Price (\$) }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Cost (\$) }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Cost (\$) }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Revenue (\$) }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Cost (\$) }
\end{array} & \text { Revenue (\$) } \
\hline 11 & 6 & 17 & & & \
10 & 7 & 19 & & & \
9 & 8 & 21 & & & \
8 & 9 & 23 & & & \
7 & 10 & 25 & & & \
\hline
\end{array}$$
-(Table: Profit-Maximizing Monopolist) Refer to the table. The profit-maximizing quantity for this monopolist is ________ units
A) 7
B) 8
C) 9
D) 10

Accepted Answer

The profit-maximizing quantity for a monopolist is where marginal revenue equals marginal cost. Since the table is incomplete, we assume the missing values align with typical monopolist behavior, and the closest option is 8 units.

Question 12

If a monopolist faces a straight-line negatively sloped demand curve, the price of the units it sells is always:
A) greater than the average revenue.
B) equal to marginal revenue.
C) greater than marginal revenue.
D) less than the average revenue.

Accepted Answer

For a monopolist facing a straight-line negatively sloped demand curve, the marginal revenue curve will also be downward sloping and lie below the demand curve. Therefore, the monopolist will have to lower the price to sell more units, resulting in a lower marginal revenue than the price. Hence, the price of the units it sells is always greater than marginal revenue. Therefore, choice C is the correct answer.

Question 13

Use the following to answer questions: Table: Profit-Maximizing Monopolist $$\begin{array} { c c c c c c c } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { Price (\$) }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Cost (\$) }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Cost (\$) }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Revenue (\$) }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Cost (\$) }
\end{array} & \text { Revenue (\$) } \
\hline 11 & 6 & 17 & & & \
10 & 7 & 19 & & & \
9 & 8 & 21 & & & \
8 & 9 & 23 & & & \
7 & 10 & 25 & & & \
\hline
\end{array}$$
-(Table: Profit-Maximizing Monopolist) Refer to the table. For the quantity of 6 units, this monopolist's average cost and average revenue levels are:
A) $2.71 and $10, respectively.
B) $2.83 and $11, respectively.
C) $2.71 and $2, respectively.
D) $2.83 and $2, respectively.

Accepted Answer

The answer of Use the following to answer questions: Table:...

Question 14

Suppose that a monopolist can sell five units of output at a price of $5 or six units of output at a price of $4. What is the marginal revenue of the sixth unit?
A) $24
B) $49
C) -$1
D) $4

Accepted Answer

To calculate marginal revenue, we need to see how total revenue changes when the monopolist sells one additional unit.

If the price for selling six units is $4, then the total revenue for those six units is:

6 units x $4 = $24

If the monopolist decides to sell a seventh unit, they have two options: 
1) Sell the seventh unit for $4 (in which case, they will earn an additional $4 in revenue) 
2) Lower the price of all units to $3.33 (in which case, they will earn an additional $4 in revenue)

Therefore, the marginal revenue of the sixth unit is $4.

(Note: Marginal revenue is the change in total revenue that results from selling one additional unit, so it does not matter what quantity the monopolist sold before.)

Therefore, the correct answer is answer choice C.

Question 15

Which of the following is TRUE for monopolists?
A) They charge a price below average cost, which guarantees above-normal profits.
B) Their marginal revenue increases with output.
C) They maximize profits by producing at the minimum of average costs.
D) They produce all units of output for which marginal revenue is greater than or equal to marginal cost.

Accepted Answer

Monopolists maximize profits by producing all units of output for which marginal revenue is greater than or equal to marginal cost. This is because a monopolist has market power, allowing them to set a higher price than a perfectly competitive market. To maximize profits, they must produce the output at which their marginal revenue equals their marginal cost, which guarantees the highest possible profit.

Question 16

If the quantity demanded for a hand-carved pineapple is two at a price of $16, and the quantity demanded will increase to three if the seller lowers the price to $14, what is the seller's marginal revenue from selling 3 units of pineapple?
A) $8
B) $24
C) $10
D) $14

Accepted Answer

Marginal revenue is the additional revenue gained from selling one additional unit. In this case, the seller will need to lower the price from $16 to $14 in order to increase the quantity demanded from two to three. Therefore, the seller's marginal revenue from selling the third unit would be $14 - $14 = $0 (since the price had to be lowered, there is no additional revenue gained from selling the third unit). The seller's total revenue from selling three units would be 2*$16 + 1*$14 = $46.

Therefore, the best choice is C ($10), as it is the only option that represents the additional revenue gained from selling the second unit (which was sold at a price of $16), and does not include any additional revenue from selling the third unit (since the price had to be lowered for it to be sold).

Question 17

Use the following to answer questions: Figure: Monopoly Profits 
-(Figure: Monopoly Profits) Refer to the figure. The monopolist earns a profit of:
A) $630.
B) $420.
C) $540.
D) $480.

Accepted Answer

The answer of Use the following to answer questions: Figure:...

Question 18

Monopoly power is best described as the ability to:
A) charge the profit-maximizing price.
B) produce the profit-maximizing output level.
C) earn economic profits without causing new firms to enter the market.
D) produce where marginal revenue intersects halfway between the origin and the demand curve.

Accepted Answer

Monopoly power is the ability of a firm to be the sole provider of a good or service without facing competition. With no competition, the firm can charge higher prices and earn economic profits without fear of new firms entering the market and undercutting their prices.

Question 19

Table: Monopolist $$\begin{array} { c c c } 
\hline \text { Output } & \text { Total Revenue } & \text { Marginal Cost } \
\hline 1 & \$ 20 & \$ 10 \
2 & 50 & 10 \
3 & 70 & 10 \
4 & 80 & 10 \
5 & 85 & 10 \
6 & 88 & 10 \
7 & 90 & 10 \
\hline
\end{array}$$ Refer to the table. What is the monopolist's profit-maximizing level of output?
A) 3
B) 4
C) 5
D) 6

Accepted Answer

The answer of Table: Monopolist \[\begin{array} { c c c...

Question 20

Typical evidence for the existence of market power would be market prices:
A) below production costs.
B) equal to production costs.
C) above production costs.
D) varying with market supply and demand conditions.

Accepted Answer

Market power exists when a firm can set prices above the level that would exist under perfect competition. Therefore, market prices would typically be above production costs. Options A and B are incorrect because prices below or equal to production costs would not allow the firm to cover its costs and make a profit. Option D is incorrect because market supply and demand conditions can affect prices under perfect competition as well, and do not necessarily indicate the presence of market power.

Quiz 13: Monopoly

Assuming the same cost structure, a competitive market produces output at prices than a monopoly market.

When a monopolist decreases the price of its good, consumers:

If the demand curve for a firm is a straight line with negative slope, which of the following is the shortcut to finding the MR?

A firm with monopoly power is able to set a markup price that is:

To maximize profit, the monopolist increases output:

In a graph showing a straight-line market demand curve, the marginal revenue curve is:

To maximize , a monopolist will produce the level of output where:

Which statement is TRUE?

Use the following to answer questions: Figure: Monopoly Profits -(Figure: Monopoly Profits) Refer to the figure. What is the monopolist's optimal price and output level?

A monopolist can sell 300 units of output for $29.00 per unit. Alternatively, it can sell 301 units of output for $28.25 per unit. The marginal revenue of the 301st unit of output is:

If a monopolist faces a straight-line negatively sloped demand curve, the price of the units it sells is always:

Suppose that a monopolist can sell five units of output at a price of $5 or six units of output at a price of $4. What is the marginal revenue of the sixth unit?

Which of the following is TRUE for monopolists?

If the quantity demanded for a hand-carved pineapple is two at a price of $16, and the quantity demanded will increase to three if the seller lowers the price to $14, what is the seller's marginal revenue from selling 3 units of pineapple?

Use the following to answer questions: Figure: Monopoly Profits -(Figure: Monopoly Profits) Refer to the figure. The monopolist earns a profit of:

Monopoly power is best described as the ability to:

Typical evidence for the existence of market power would be market prices: