Question 1

-Refer to Figure 10.2.The marginal revenue of the eighth pound of burritos is
A) $3.
B) $5.
C) $6.
D) $24.

Accepted Answer

B

Question 2

-Refer to Figure 10.1.The marginal revenue of the fifth pound of cheese is
A) $1.
B) $2.
C) $5.
D) $25.

Accepted Answer

The marginal revenue of the fifth pound of cheese is $1 because the total revenue increases by $1 when the quantity sold increases from 4 to 5 pounds.

Question 3

A monopolist can
A) sell as much as he wants at the chosen price since he is the only seller.
B) increase price only if he is willing to reduce output sold.
C) increase the price of his output and still sell the same quantity.
D) increase the price of his output and the quantity sold at the same time.

Accepted Answer

A monopolist is the only seller in the market and therefore has no substitutes. If the monopolist raises the price of their output, consumers will decrease their demand. Therefore, a monopolist can increase the price only if they are willing to reduce the output sold to maintain their profit. A monopolist cannot increase the price and sell the same quantity (option C) or increase the price and quantity sold at the same time (option D) as it violates the law of demand. Option A is incorrect because even though a monopolist is the only seller, they cannot sell as much as they want at any price, as they still have to consider demand and consumer behavior.

Question 4

Which type of barrier to entry allows the electric company to maintain a monopoly over the production of electricity?
A) a patent
B) economies of scale
C) diseconomies of scale
D) ownership of a scarce factor of production

Accepted Answer

Economies of scale in the production of electricity result in the electric company being able to produce electricity at a lower cost compared to potential competitors. This makes it difficult for new companies to enter the market and compete with the established firm. As a result, the electric company is able to maintain a monopoly over the production of electricity. Patents, ownership of a scarce factor of production, and diseconomies of scale may also create barriers to entry, but they are not the best answer in this specific scenario.

Question 5

Which of the following is a barrier to entry for a monopoly?
A) government licensing
B) patents
C) network externalities
D) all of the above

Accepted Answer

All of the above are barriers to entry for a monopoly.

- Government licensing: The government can require businesses to obtain licenses in order to operate in certain industries or provide certain services. This creates a barrier to entry because new companies may not be able to obtain the necessary licenses, or may not have the resources to go through the process of obtaining them.
- Patents: A patent is a legal protection for an invention that gives the patent holder the exclusive right to use and sell the invention for a certain period of time. This creates a barrier to entry because competitors cannot legally produce or sell the same product during the patent's duration.
- Network externalities: Network externalities occur when the value of a product or service increases as more people use it. This creates a barrier to entry because a new company may not be able to attract enough customers to reach critical mass and compete with the established company.

Question 6

Assume a non-price discriminating monopolist can sell 45 units of a good for $ 1.50 each and can sell 46 units of that good for $ 1.45 each.The marginal revenue of the 46th unit is
A) $0.80.
B) $0.08.
C) -$0.08.
D) -$0.80.

Accepted Answer

The marginal revenue (MR) of the 46th unit is calculated by the total revenue change when an additional unit is sold. Initially, selling 45 units at $1.50 each gives a total revenue of $67.50. Selling 46 units at $1.45 each gives a total revenue of $66.70. The change in total revenue from selling the 46th unit is $66.70 - $67.50 = -$0.80, indicating the marginal revenue of the 46th unit is -$0.80.

Question 7

-Refer to Figure 10.2.The marginal revenue of the 10th pound of burritos is
A) -$4.
B) -$1.
C) $1.
D) $4.

Accepted Answer

Marginal revenue is the change in total revenue from selling one more unit. From the 9th to the 10th pound, total revenue increases from $27 to $28, a change of $1.

Question 8

The trade-offs faced by a monopolist in cutting price to sell a larger quantity leads to marginal revenue being
A) less than price.
B) greater than price.
C) equal to price.
D) none of the above

Accepted Answer

When a monopolist cuts the price to sell a larger quantity, it faces a trade-off between the gain from selling more units and the loss from reducing the price. As a result, the marginal revenue (the extra revenue gained from selling one additional unit) will be less than the price. This is because the monopolist has to lower the price for all units sold, not just the additional one. Therefore, to maximize profit, the monopolist should set the price where marginal cost equals marginal revenue, which will be below the original price.

Question 9

For a non-price discriminating monopolist to sell more units of output,
A) the price must be increased.
B) the price must be reduced.
C) demand must become more elastic.
D) the other competing firms must sell fewer units.

Accepted Answer

For a non-price discriminating monopolist to sell more units of output, the price must be reduced. This is because a higher price will cause demand to decrease, resulting in lower sales. By reducing the price, the monopolist can attract more customers and increase sales.

Question 10

Barriers to entry are used to
A) enable a firm to exercise control over the price of its product.
B) prevent other firms from entering the market.
C) allow the firm to earn economic profits.
D) all of the above

Accepted Answer

Barriers to entry serve multiple purposes: they enable a firm to have control over its product pricing, prevent new competitors from entering the market, and consequently allow the firm to earn economic profits by reducing competition.

Question 11

Assume a non-price discriminating monopolist can sell 20 units of a good for 4.00 each and can sell 21 units of that good for $ 3.85 each.The marginal revenue of the 21st unit is
A) $85.00.
B) $0.85.
C) -$0.85.
D) -$85.00.

Accepted Answer

Marginal revenue is the additional revenue generated by selling one more unit of the good. 
Since the monopolist can sell 20 units for $4.00 each, the total revenue from selling 20 units is:
Total revenue = 20 x $4.00 = $80.00
When the monopolist sells the 21st unit, the price decreases to $3.85. 
Therefore, if the monopolist sells 21 units, the total revenue will be:
Total revenue = 20 x $4.00 + 1 x $3.85 = $83.85
The marginal revenue of the 21st unit is the additional revenue generated by selling the 21st unit alone, which is:
Marginal revenue = Total revenue from selling 21 units - Total revenue from selling 20 units
Marginal revenue = $83.85 - $80.00 = $3.85
Therefore, the answer is B, which is $0.85.

Question 12

A local cable company has a monopoly on cable service.If it sells 20 of its packages its total revenue is $10,000,and if it sells 21 packages its total revenue is $10,600.When the local cable company sells 21 packages,the price per package is closest to
A) $600.
B) $505.
C) $500.
D) $50.

Accepted Answer

The increase in total revenue when selling one additional package (from 20 to 21) is $600 ($10,600 - $10,000). Since selling this additional package increases total revenue by $600, and the total revenue at 21 packages is $10,600, the price per package at 21 packages is approximately $10,600 / 21 ≈ $505.

Question 13

A local cable company has a monopoly on cable service.If it sells 20 of the services its total revenue is $10,000 and if it sells 21 services its total revenue is $10,600.The marginal revenue of the 21st service sold is
A) $13.
B) $600.
C) $800.
D) $850.

Accepted Answer

To find the marginal revenue of the 21st service, we need to calculate the change in total revenue when going from selling 20 services to 21 services.

Change in total revenue = Total revenue from selling 21 services - Total revenue from selling 20 services

Change in total revenue = $10,600 - $10,000

Change in total revenue = $600

So the marginal revenue of the 21st service sold is $600, which is Option B.

Question 14

In a monopoly,the market demand curve is
A) the same as the demand curve facing the firm.
B) the summation of all the individual firms' demand curves.
C) nonexistent.
D) the marginal cost curve above minimum average variable cost.

Accepted Answer

In a monopoly, there is only one firm in the market, so the demand curve facing the firm is the same as the market demand curve. The firm has the power to set prices and the market demand curve represents the maximum amount consumers are willing to pay for the product, which the firm can charge.

Question 15

-Refer to Figure 10.1.The marginal revenue of the sixth pound of cheese is
A) -$4.
B) -$1.
C) $1.
D) $4.

Accepted Answer

The marginal revenue of the sixth pound of cheese is calculated by the change in total revenue from selling the fifth to the sixth pound. If the total revenue increases by a small amount or decreases (indicating a negative marginal revenue), it reflects the additional revenue generated by selling one more unit. In this case, without the specific figure, the general approach to find marginal revenue is to look at the difference in total revenue between the two quantities. Since the question suggests a decrease, the closest logical answer based on the provided options is -$1, indicating a decrease in total revenue with the sale of the sixth pound, which aligns with how marginal revenue can become negative if additional sales reduce total revenue.

Question 16

The Rare Bird Company has a monopoly in the sale of macaws in Iowa.When the Rare Bird Company sells three macaws its marginal revenue is $30.When the Rare Bird Company sells four macaws its marginal revenue will be
A) less than $30.
B) greater than $30.
C) equal to $30.
D) greater than $30 if demand is elastic and less than $30 if demand is inelastic.

Accepted Answer

In a monopolistic market, the marginal revenue decreases as the quantity sold increases due to the downward sloping demand curve. This means that to sell more units, the price must decrease, which in turn decreases the marginal revenue for additional units sold.

Question 17

Strawberry,Inc.has a monopoly on the sale of a specialized smartphone.If it sells 9 of these smartphones its total revenue is $1,800,and if it sells 10 smartphones its total revenue is $1,950.The marginal revenue of the tenth smartphone sold is
A) $75.
B) $150.
C) $1,800.
D) $1,950.

Accepted Answer

The marginal revenue is the additional revenue earned from selling one more unit. To find the marginal revenue of the 10th smartphone, we need to compare the total revenue of selling 10 smartphones with the total revenue of selling 9 smartphones.

Total revenue of selling 9 smartphones = $1,800 
Total revenue of selling 10 smartphones = $1,950

Marginal revenue of the 10th smartphone sold = Total revenue of selling 10 smartphones - Total revenue of selling 9 smartphones 
= $1,950 - $1,800 
= $150

Therefore, the marginal revenue of the tenth smartphone sold is $150, which is the option B.

Question 18

To maximize profit,the monopolist produces on the ________ portion of the demand curve where ________.
A) elastic; price equals marginal cost
B) elastic; marginal revenue equals marginal cost
C) inelastic; price equals marginal revenue
D) inelastic; marginal revenue equals marginal cost

Accepted Answer

To maximize profit, a monopolist produces where marginal revenue equals marginal cost, which occurs on the elastic portion of the demand curve. This is because, in the elastic portion, lowering the price slightly increases total revenue, allowing for profit maximization.

Question 19

For a profit-maximizing monopolist,price
A) equals marginal revenue.
B) is less than marginal revenue.
C) is greater than marginal revenue.
D) can be greater than or less than marginal revenue.

Accepted Answer

For a profit-maximizing monopolist, the price charged is always greater than marginal revenue due to the downward-sloping demand curve. This is because, to sell an additional unit, the monopolist must lower the price on all units sold, which makes the marginal revenue less than the price.

Question 20

Assume that Pura Water,a local monopoly water utility company,is currently selling 10,000 gallons per hour at a price of $0.10 per gallon.If Pura Water wants to sell 1,000 gallons more,it will have to lower the price to $0.09 per gallon.The marginal revenue of the 10,001 is approximately
A) -$999.91.
B) -$99.91.
C) $9.91.
D) $99.91.

Accepted Answer

Marginal revenue is the additional revenue earned by selling one more unit of the product.

In this case, Pura Water is facing a downward-sloping demand curve, which means that if it wants to sell 1,000 more gallons, it will have to lower the price from $0.10 to $0.09 per gallon.

So, the total revenue from selling 10,000 gallons per hour is:
TR = Price x Quantity = $0.10 x 10,000 = $1,000 per hour

And, the total revenue from selling 10,001 gallons per hour at $0.09 per gallon is:
TR = Price x Quantity = $0.09 x 10,001 = $900.09 per hour

Therefore, the marginal revenue from selling the 10,001st gallon is:
MR = Total revenue from selling 10,001 gallons - Total revenue from selling 10,000 gallons
MR = $900.09 - $1,000 = -$99.91

The negative sign indicates that selling the 10,001st gallon reduces the total revenue of Pura Water. Therefore, the best choice is B.

Quiz 10: Monopoly and Price Discrimination

-Refer to Figure 10.2.The marginal revenue of the eighth pound of burritos is

-Refer to Figure 10.1.The marginal revenue of the fifth pound of cheese is

A monopolist can

Which type of barrier to entry allows the electric company to maintain a monopoly over the production of electricity?

Which of the following is a barrier to entry for a monopoly?

Assume a non-price discriminating monopolist can sell 45 units of a good for $ 1.50 each and can sell 46 units of that good for $ 1.45 each.The marginal revenue of the 46th unit is

-Refer to Figure 10.2.The marginal revenue of the 10th pound of burritos is

The trade-offs faced by a monopolist in cutting price to sell a larger quantity leads to marginal revenue being

For a non-price discriminating monopolist to sell more units of output,

Barriers to entry are used to

Assume a non-price discriminating monopolist can sell 20 units of a good for 4.00 each and can sell 21 units of that good for $ 3.85 each.The marginal revenue of the 21st unit is

A local cable company has a monopoly on cable service.If it sells 20 of its packages its total revenue is $10,000,and if it sells 21 packages its total revenue is $10,600.When the local cable company sells 21 packages,the price per package is closest to

A local cable company has a monopoly on cable service.If it sells 20 of the services its total revenue is $10,000 and if it sells 21 services its total revenue is $10,600.The marginal revenue of the 21st service sold is

In a monopoly,the market demand curve is

-Refer to Figure 10.1.The marginal revenue of the sixth pound of cheese is

The Rare Bird Company has a monopoly in the sale of macaws in Iowa.When the Rare Bird Company sells three macaws its marginal revenue is $30.When the Rare Bird Company sells four macaws its marginal revenue will be

Strawberry,Inc.has a monopoly on the sale of a specialized smartphone.If it sells 9 of these smartphones its total revenue is $1,800,and if it sells 10 smartphones its total revenue is $1,950.The marginal revenue of the tenth smartphone sold is

To maximize profit,the monopolist produces on the portion of the demand curve where .

For a profit-maximizing monopolist,price

Assume that Pura Water,a local monopoly water utility company,is currently selling 10,000 gallons per hour at a price of $0.10 per gallon.If Pura Water wants to sell 1,000 gallons more,it will have to lower the price to $0.09 per gallon.The marginal revenue of the 10,001 is approximately