Question 1

If a monopolist's marginal revenue is $35 per unit and its marginal cost is $25,then
A)to maximize profit the firm should increase output.
B)to maximize profit the firm should decrease output.
C)to maximize profit the firm should continue to produce the output it is producing.
D)Not enough information is given to say what the firm should do to maximize profit.

Accepted Answer

A monopolist maximizes profit by producing where marginal revenue equals marginal cost. Since the marginal revenue ($35) is greater than the marginal cost ($25), the firm can increase profit by producing more units. Therefore, the best choice is A, to increase output.

Question 2

If a monopolist's price is $50 at 63 units of output and marginal revenue equals marginal cost and average total cost equals $43,then the firm's total profit is
A)$3,150.
B)$2,709.
C)$441.
D)$7.

Accepted Answer

The answer of If a monopolist's price is $50 at...

Question 3

The most profitable price for a monopolist is
A)the highest price a consumer is willing to pay for the monopolist's product.
B)the price at which demand is unit-elastic.
C)a price that maximizes the quantity sold.
D)the price for which marginal revenue equals marginal cost.

Accepted Answer

The most profitable price for a monopolist is where marginal revenue (MR) equals marginal cost (MC). This is because the monopolist has market power and can set prices higher than the perfectly competitive market equilibrium price. However, if the monopolist charges too high a price, it will decrease the quantity demanded and lower its profits. Therefore, the monopolist should produce the quantity where MR=MC and charge the price that consumers are willing to pay for that quantity. This will maximize the monopolist's profits. Choice A is not necessarily true because a price higher than the consumer's willingness to pay can actually decrease the monopolist's profits. Choice B is not necessarily true because the monopolist may be able to charge a price higher or lower than the unit elastic price and still make profits. Choice C is not necessarily true because a higher quantity sold at a lower price may not result in the highest profits for the monopolist.

Question 4

"Being the only seller in the market,the monopolist can choose any price and quantity it desires." Evaluate this statement: is it true or false? Explain your answer.

Accepted Answer

The answer of "Being the only seller in the market,the...

Question 5

Which of the following statements is true?
A)Monopolists are price makers.All other firms are price takers.
B)Unlike other industries,monopoly industries have high barriers to entry.
C)Only monopoly firms are granted patents and copyrights.
D)Unlike other firms,a monopolist's demand curve is the same as the market demand curve.

Accepted Answer

The answer of Which of the following statements is true?
A)Monopolists...

Question 6

A monopolist will maximize profit where marginal revenue equals marginal cost.

Accepted Answer

This is a basic principle of monopolies. A monopolist will produce at the level of output where marginal revenue (the additional revenue from selling one more unit) equals marginal cost (the additional cost of producing one more unit). This level of output will result in the highest profit for the monopolist.

Question 7

A monopolist currently sells 18 units of a good.If marginal revenue on the last unit sold is $117,then the price of the good must be less than $117.

Accepted Answer

The answer of A monopolist currently sells 18 units of...

Question 8

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.As a result of this change
A)Price will be higher,output will be lower and the deadweight loss will be eliminated.
B)Consumer surplus will be smaller,producer surplus will be greater and there will be a reduction in economic efficiency.
C)Price will be higher,consumer surplus will be greater and output will be greater.
D)Consumer surplus will be smaller and producer surplus will be greater.There will be a net increase in economic surplus.

Accepted Answer

When an industry changes from perfectly competitive to a monopoly, the monopolist gains market power which allows them to set prices higher than the competitive equilibrium price. This leads to a reduction in output and an increase in price resulting in a decrease in consumer surplus. The monopoly also gains more producer surplus due to their ability to charge a higher price. Economic efficiency is lowered due to the deadweight loss caused by the monopolist restricting output. Therefore, the correct choice is B.

Question 9

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements comparing the conditions in the industry under both market structures is true?
A)A monopoly will produce more and charge a higher price than would a perfectly competitive industry producing the same good.
B)A monopoly will produce more and advertise more than would a perfectly competitive industry producing the same good.
C)A monopoly will produce less and charge a higher price than would a perfectly competitive industry producing the same good.
D)A monopoly will produce less and charge a lower price than would a perfectly competitive industry producing the same good.

Accepted Answer

In a monopoly, there is only one firm controlling the market, which means that there are no close substitutes for consumers to choose from. This lack of competition allows the firm to charge a higher price than in a perfectly competitive market. Additionally, the firm may choose to produce less than in a perfectly competitive market in order to keep prices high and maximize profits. Therefore, statement C is true: A monopoly will produce less and charge a higher price than would a perfectly competitive industry producing the same good.

Question 10

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements regarding economic surplus in each market structure is true?
A)Under perfectly competitive conditions,economic surplus in this industry equals consumer surplus plus producer surplus.Under monopoly conditions,some consumer surplus is transferred to producer surplus,but economic surplus is the same as it was under perfectly competitive conditions.
B)Under perfectly competitive conditions,economic surplus in this industry is maximized.Under monopoly conditions economic surplus is minimized.
C)Under perfectly competitive conditions,economic surplus is equal to consumer surplus; there is no producer surplus because firms are price-takers.Under monopoly conditions,economic surplus is equal to producer surplus.
D)Under perfectly competitive conditions,economic surplus is maximized.Under monopoly conditions economic surplus is less than under perfect competition and there is a deadweight loss.

Accepted Answer

In a perfectly competitive market, economic surplus is maximized because both consumers and producers are able to achieve their desired outcomes. However, in a monopoly, the monopolist is able to restrict output and raise prices, leading to a decrease in consumer surplus and a transfer of some of that surplus to producer surplus. Therefore, economic surplus is less than it was under perfect competition and there is a deadweight loss, represented by the area between the demand curve and the marginal cost curve that is no longer being served by the monopolist.

Question 11

A monopolist's demand curve is the same as the marginal revenue curve for the product.

Accepted Answer

A monopolist's demand curve is downward sloping, meaning that in order to sell more units, the monopolist must lower the price of the product. As a result, the marginal revenue curve lies below the demand curve. Therefore, the monopolist cannot simply sell each additional unit at the same price; they must lower the price to attract buyers, which means that their marginal revenue will be less than their price.

Question 12

To maximize profit a monopolist will produce where
A)marginal revenue is equal to marginal cost.
B)demand for its product is unit-elastic.
C)revenue per unit is maximized.
D)average total cost is equal to average revenue.

Accepted Answer

A monopolist will produce where marginal revenue is equal to marginal cost in order to maximize their profit. This is because marginal revenue represents the change in total revenue for each additional unit of output produced, and marginal cost represents the change in total cost for each additional unit of output produced. When marginal revenue exceeds marginal cost, the monopolist can increase their profit by producing more output. When marginal cost exceeds marginal revenue, the monopolist can increase their profit by producing less output. Therefore, the monopolist will produce the level of output where marginal revenue and marginal cost are equal, in order to maximize their profit.

Question 13

The demand curve for a monopoly firm
A)is perfectly inelastic.
B)lies below its marginal revenue curve.
C)is the same as the market demand curve.
D)is horizontal.

Accepted Answer

The answer of The demand curve for a monopoly firm
A)is...

Question 14

Table 15-2
  Assume Table 15-2 gives the monthly demand and costs for subscriptions to basic cable for Comcast,a cable television monopoly in Philadelphia.
-Refer to Table 15-2.If Comcast maximizes its profits how much profit will it earn?
A)$84
B)$40
C)$4
D)Comcast will break even.

Accepted Answer

The answer of Table 15-2
  Assume Table 15-2 gives...

Question 15

Which of the following statements is true?
A)If a tax is imposed on a product sold by a monopolist,the monopolist will maximize its profits by producing where marginal revenue equals marginal cost.
B)A monopolist will always charge the highest possible price.
C)If a tax is imposed on a product sold by a monopolist,the monopolist can increase its price to pass along the entire tax to consumers.
D)Because a monopolist faces no competition,the demand for its product is perfectly inelastic.

Accepted Answer

When a tax is imposed on a monopolist, its marginal cost curve will shift upward. To maximize profits, the monopolist should produce where marginal revenue equals the new marginal cost, which will result in a higher price for consumers. This is because the monopolist has market power, but it cannot simply pass along the entire tax to consumers because it still faces some demand elasticity. Therefore, both statements B and C are false. Statement D is also false because even though the monopolist may face less elastic demand than a perfectly competitive firm, the demand is not perfectly inelastic.

Question 16

Figure 15-5  Figure 15-5 shows the cost and demand curves for a monopolist.
-Refer to Figure 15-5.Assume the firm maximizes its profits.What is the amount of consumer surplus?
A)$21
B)$124
C)$186
D)$332

Accepted Answer

Consumer surplus is the difference between the willingness to pay and the actual price paid by the consumer. In this case, the consumer surplus is the area below the demand curve and above the price charged (vertical distance between the price and demand curve). The consumer surplus can be calculated as the area of the triangle ABC, which is (½) x (10 x 14) = $70. Since there are two consumers buying at this price, the total consumer surplus is $70 x 2 = $140. However, one consumer is willing to pay $46, but pays only $14, which creates an additional consumer surplus of (½) x (9 x 32) = $144. Therefore, the total consumer surplus is $140 + $144 = $284. However, this is the total consumer surplus, including the surplus generated by the units sold above the equilibrium price. To obtain the consumer surplus at the equilibrium quantity and price, we need to subtract the surplus generated by the last unit sold (marked by D). The surplus generated by this unit is (½) x (5 x 10) = $25. Therefore, the consumer surplus at the equilibrium quantity and price is $284 - $25 = $259, which is closest to option (C).

Question 17

Explain whether a monopoly that maximizes profit will also be maximizing revenue and production.

Accepted Answer

The answer of Explain whether a monopoly that maximizes profit...

Question 18

Figure 15-4  Figure 15-4 reflects the cost and revenue structure for a monopoly that has been in business for a very long time.
-Refer to Figure 15-4.Use the figure above to answer the following questions.
a.Identify the curves labeled A and B.Identify the curve which contains both point Y and point Z.Identify the curve which contains both point V and point W.
b.What is the profit-maximizing quantity and what price will the monopolist charge?
c.What area represents total revenue at the profit-maximizing output level?
d.What area represents total cost at the profit-maximizing output level?
e.What area represents profit?
f.What is the profit per unit (average profit)at the profit-maximizing output level?
g.If this industry was organized as a perfectly competitive industry,what would be the profit-maximizing price and quantity?
h.What area represents the deadweight loss as a result of a monopoly?

Accepted Answer

The answer of Figure 15-4  Figure 15-4 reflects the...

Question 19

What is the difference between a monopoly's marginal revenue curve and a perfect competitor's marginal revenue curve?

Accepted Answer

The answer of What is the difference between a monopoly's...

Question 20

If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43,then the incremental profit from the last unit sold is $7.

Accepted Answer

The answer of If a monopolist's price is $50 at...

Quiz 15: Monopoly and Antitrust Policy

If a monopolist's marginal revenue is $35 per unit and its marginal cost is $25,then

If a monopolist's price is $50 at 63 units of output and marginal revenue equals marginal cost and average total cost equals $43,then the firm's total profit is

The most profitable price for a monopolist is

"Being the only seller in the market,the monopolist can choose any price and quantity it desires." Evaluate this statement: is it true or false? Explain your answer.

Which of the following statements is true?

A monopolist will maximize profit where marginal revenue equals marginal cost.

A monopolist currently sells 18 units of a good.If marginal revenue on the last unit sold is $117,then the price of the good must be less than $117.

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.As a result of this change

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements comparing the conditions in the industry under both market structures is true?

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements regarding economic surplus in each market structure is true?

A monopolist's demand curve is the same as the marginal revenue curve for the product.

To maximize profit a monopolist will produce where

The demand curve for a monopoly firm

Table 15-2 Assume Table 15-2 gives the monthly demand and costs for subscriptions to basic cable for Comcast,a cable television monopoly in Philadelphia. -Refer to Table 15-2.If Comcast maximizes its profits how much profit will it earn?

Which of the following statements is true?

Figure 15-5 Figure 15-5 shows the cost and demand curves for a monopolist. -Refer to Figure 15-5.Assume the firm maximizes its profits.What is the amount of consumer surplus?

Explain whether a monopoly that maximizes profit will also be maximizing revenue and production.

What is the difference between a monopoly's marginal revenue curve and a perfect competitor's marginal revenue curve?

If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43,then the incremental profit from the last unit sold is $7.