Question 1

-Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sues demand and marginal revenue curves are illustrated in the figure above. Sue's Surfboards currently rents 15 surfboards an hour. Sue's total revenue from the 15 surfboards is

Accepted Answer

The answer of 
-Sue's Surfboards is the sole renter of...

Question 2

-La Bella Pizza is the only pizza place on Pepper Island. The figure above shows La Bella Pizza's demand curve, marginal revenue curve, and marginal cost curve. At La Bella Pizza's profit-maximizing output, its annual total revenue is

Accepted Answer

At the profit-maximizing output, the quantity is where marginal revenue equals marginal cost. The corresponding price on the demand curve at this quantity gives the total revenue. Based on the given options, $312,000 is the correct total revenue at this output level.

Question 3

-The unregulated, single-price monopoly shown in the figure above will sell

Accepted Answer

The unregulated, single-price monopoly will sell at the quantity where marginal revenue equals marginal cost. In the figure, this occurs at a quantity of 30 tickets.

Question 4

-Bob's Books is the only bookstore in town. The figure above shows the demand curve for books and Bob's Books' marginal revenue curve and marginal cost curve. Bob's Books maximizes its profit and sets the price of a book equal to ________ and has total annual revenue of ________.

Accepted Answer

Bob's Books maximizes profit where marginal cost equals marginal revenue. At this point, the price is $30, and with 2,000 books sold, total revenue is $60,000.

Question 5

In a small town, Marilyn's Christmas Tree Lot has a monopoly on sales of Christmas trees. In order to increase her sales from 100 trees to 101 trees, she must drop the price of all of her trees from $20 to $19. What is the marginal revenue?

Accepted Answer

The marginal revenue is the change in total revenue from selling one more unit. Initially, total revenue is 100 trees * $20 = $2000. After the price drop, total revenue is 101 trees * $19 = $1919. The marginal revenue is $1919 - $2000 = -$81.

Question 6

-Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sue's demand and marginal revenue curves are illustrated in the figure above. The change in the total revenue from renting the 15th surfboard is

Accepted Answer

The answer of 
-Sue's Surfboards is the sole renter of...

Question 7

One difference between perfectly competitive markets and single-price monopoly markets is that

Accepted Answer

In perfectly competitive markets, marginal revenue equals price because firms are price takers. In contrast, a single-price monopolist's marginal revenue is less than the price due to the downward-sloping demand curve.

Question 8

Relative to a perfectly competitive market with the same cost and demand, a single-price monopolist produces ________ output and has a ________ price.

Accepted Answer

A single-price monopolist produces less output and charges a higher price compared to a perfectly competitive market due to its market power and the downward-sloping demand curve it faces.

Question 9

A key difference between a monopoly and a perfectly competitive firm is that the monopolist

Accepted Answer

A monopolist's marginal revenue curve lies below its demand curve because it must lower the price to sell additional units, unlike a perfectly competitive firm that faces a perfectly elastic demand curve.

Question 10

-The monopoly illustrated in the figure above is unregulated and charges a single price. The deadweight loss created by the monopoly is

Accepted Answer

The answer of 
-The monopoly illustrated in the figure above...

Question 11

If a monopoly is producing an amount of output level at which marginal revenue exceeds marginal cost, in order to increase its profit the monopoly will ________ its price and ________ its output.

Accepted Answer

When marginal revenue exceeds marginal cost, the monopoly can increase its profit by producing more output and lowering the price, as this will increase total revenue more than total cost.

Question 12

Which of the following is TRUE for both monopoly and a perfectly competitive firm?

Accepted Answer

Both monopoly and perfectly competitive firms maximize profits by producing at the level of output where marginal revenue equals marginal cost.

Question 13

Compared to a single-price monopoly, a perfectly competitive market with the same costs produces ________ output and has a ________ price.

Accepted Answer

A perfectly competitive market produces more output and has a lower price compared to a single-price monopoly because competition drives prices down and increases output to the level where price equals marginal cost.

Question 14

-The figure above shows the demand and marginal revenue curves facing Sue's Surfboards, the sole renter of surfboards on Big Wave Island. If Sue is renting 25 surfboards an hour so that the marginal revenue is negative, then Sue's Surfboards

Accepted Answer

When marginal revenue is negative, the demand is inelastic, meaning that increasing the quantity reduces total revenue.

Question 15

-An unregulated, single-price monopoly is shown in the figure above. If fixed cost is $20, the monopoly's total costs when it is maximizing its profit will be

Accepted Answer

The total cost for the monopoly when maximizing profit includes both fixed and variable costs. Given that fixed cost is $20, the remaining cost must be variable costs. Since the total cost is $80, the variable cost is $60, making the total cost $80.

Question 16

Which of the following statements is TRUE for both a competitive market and a single-price monopoly?

Accepted Answer

Both a competitive market and a single-price monopoly maximize profit by producing the quantity at which marginal revenue equals marginal cost.

Question 17

-The above figure shows the demand and cost curves for a monopolist. What is the maximum economic profit this firm can make?

Accepted Answer

The maximum economic profit for a monopolist is found where marginal cost (MC) equals marginal revenue (MR), and the price is determined from the demand curve. The profit is the difference between total revenue and total cost at this output level. Based on the given options, $200 is the maximum profit achievable.

Question 18

-The above figure illustrates a single-price unregulated monopolist. If the monopolist maximizes its profit, the deadweight loss equals

Accepted Answer

The deadweight loss is the triangle below the demand curve and above the marginal cost curve. In this case, the deadweight loss is $10,000.

Question 19

-The above figure illustrates a single-price unregulated monopolist. If the monopolist maximizes its profit, the consumer surplus equals

Accepted Answer

Consumer surplus is the area below the demand curve and above the price line. In this case, the consumer surplus is the area of the triangle with a base of 10 and a height of 2. The area of a triangle is (1/2) * base * height, so the consumer surplus is (1/2) * 10 * 2 = $10,000.

Question 20

-An unregulated, single-price monopoly is shown in the figure above. If its fixed cost is $20, the monopoly's total economic profit when it is maximizing its profit will be

Accepted Answer

The monopoly maximizes profit where marginal cost equals marginal revenue. The total economic profit is calculated as total revenue minus total cost, including fixed costs. Given the fixed cost of $20, the profit is $25.

Quiz 13: Monopoly