Question 1

When a monopolist lowers its price from $80 to $70, the quantity it is able to sell increases from 100 to 150. The change in revenue associated with the output effect is equal to:
A) $3,500.
B) ?$3,500.
C) $500.
D) ?$500.
E) $4,000.

Accepted Answer

The output effect is the change in revenue due to the change in quantity sold. In this case, the quantity sold increases from 100 to 150, so the output effect is equal to the change in revenue per unit multiplied by the change in quantity. The change in revenue per unit is $70 - $80 = -$10, and the change in quantity is 150 - 100 = 50, so the output effect is -$10 * 50 = -$500.

Question 2

Refer to the accompanying figure to answer the  questions. 
-This firm:
A) is in a competitive market.
B) can make a profit.
C) does not want to maximize profit.
D) cannot make a profit.
E) is not a monopoly because it is incurring a loss.

Accepted Answer

The answer of Refer to the accompanying figure to answer...

Question 3

Refer to the accompanying figure to answer the  questions. 
-This profit-maximizing firm's total profit is equal to:
A) $160.
B) ?$160.
C) $320.
D) ?$320.
E) $100.

Accepted Answer

The answer of Refer to the accompanying figure to answer...

Question 4

The profit made by this profit-maximizing firm is:
A) $8.
B) $4.
C) $3.
D) $7.
E) $9.

Accepted Answer

The answer of The profit made by this profit-maximizing firm...

Question 5

The profit-maximizing price for this firm is:
A) $15.
B) $5.
C) $7.
D) $9.
E) $13.

Accepted Answer

To find the profit-maximizing price, we need to find the point where marginal revenue (MR) equals marginal cost (MC), which in this case is at a price of $9. At that price, the monopolist will produce 6 units of output, resulting in a total profit of $36. At any other price, the monopolist either produces too much or too little, resulting in lower profits.

Question 6

Which of the following is a characteristic of a monopoly but not a characteristic of a competitive market?
A) A monopoly contains many firms.
B) A monopoly produces an efficient level of output.
C) A monopoly may earn long-run economic profits.
D) A monopoly has no market power.
E) A monopoly is a price-taker.

Accepted Answer

A monopoly may earn long-run economic profits due to its ability to restrict output and charge higher prices, while in a competitive market, firms compete with each other, leading to zero economic profits in the long run. The other options are characteristics of a competitive market, not a monopoly.

Question 7

When the price changes from $50 to $30, the output effect leads to an increase of ____________ in revenue.
A) $20
B) $15
C) $900
D) $600
E) $450

Accepted Answer

The answer of When the price changes from $50 to...

Question 8

When the price changes from $50 to $30, the price effect leads to a loss of ____________ in revenue.
A) $20
B) $15
C) $900
D) $600
E) $450

Accepted Answer

The answer of When the price changes from $50 to...

Question 9

As production increases, the price consumers are willing to pay for the good:
A) increases and then decreases.
B) decreases and then increases.
C) stays the same.
D) increases.
E) decreases.

Accepted Answer

According to the law of demand, as the quantity of a good supplied increases, the price consumers are willing to pay for that good decreases. Therefore, as production increases for the monopolist in this table, the price consumers are willing to pay (as represented by the marginal revenue) decreases.

Question 10

When marginal revenue is positive, the:
A) lost revenues associated with the price effect outweigh the revenue gains created by the output effect.
B) lost revenues associated with the price effect are outweighed by the revenue gains created by the output effect.
C) output effect is relatively small compared to the price effect.
D) firm is maximizing revenues.
E) firm cannot be maximizing profits.

Accepted Answer

When marginal revenue is positive, it means that the revenue gained by producing an additional unit of the product is greater than the revenue lost due to a decrease in price. Therefore, the revenue gains created by the output effect outweigh the lost revenues associated with the price effect. The firm is maximizing profits in this situation.

Question 11

The equation of a firm's marginal revenue curve is estimated to be price = 50 ? Q (quantity), and the equations of their marginal cost curve is estimated to be price = 10 + 3Q. The profit-maximizing quantity for this firm is:
A) 5.
B) 10.
C) 15.
D) 50.
E) 40.

Accepted Answer

The answer of The equation of a firm's marginal revenue...

Question 12

The equation of a firm's marginal revenue curve is estimated to be P = 50 ? Q (quantity), and the equations of their marginal cost curve is estimated to be P = 10 + 3Q. The profit-maximizing price for this firm is:
A) $5.
B) $10.
C) $15.
D) $50.
E) $40.

Accepted Answer

To find the profit-maximizing price, set marginal revenue (MR) equal to marginal cost (MC). MR is given by P = 50 - Q, and MC is given by P = 10 + 3Q. Solving 50 - Q = 10 + 3Q gives Q = 10. Substitute Q = 10 into the MR equation to find the price: P = 50 - 10 = 40.

Question 13

The profit-maximizing quantity for this firm is:
A) 0 (zero).
B) 1.
C) 3.
D) 4.
E) 5.

Accepted Answer

The answer of The profit-maximizing quantity for this firm is:
A)...

Question 14

If a monopolist is producing a quantity where marginal revenue is equal to $125 and the marginal cost is equal to $125, the monopolist should:
A) increase production and lower the price to maximize profits.
B) decrease production and increase the price to maximize profits.
C) continue producing at the current price to maximize profits.
D) increase production and increase the price to maximize profits.
E) decrease production and decrease the price to maximize profits.

Accepted Answer

When marginal revenue equals marginal cost, the monopolist is producing at the profit-maximizing level of output. Therefore, the monopolist should continue producing at the current price to maximize profits. If they were to increase production, marginal cost would exceed marginal revenue, leading to a reduction in profits. If they were to decrease production, marginal revenue would be greater than marginal cost, also leading to a reduction in profits.

Question 15

When a monopolist lowers a price from $80 to $70, the quantity that the firm is able to sell increases from 100 to 150. The change in revenue associated with the price effect is equal to:
A) $3,500.
B) ?$3,500.
C) $1,000.
D) ?$1,000.
E) $4,000.

Accepted Answer

The answer of When a monopolist lowers a price from...

Question 16

At the profit-maximizing output in a monopoly-controlled market, the price a monopolist charges is:
A) below marginal cost.
B) above marginal cost.
C) above average total cost.
D) below average total cost.
E) equal to marginal cost.

Accepted Answer

A monopolist maximizes profit by producing where marginal revenue equals marginal cost (MR=MC). At this point, the monopolist charges a price that is higher than marginal cost to maximize profit. Therefore, the price a monopolist charges is above marginal cost (option B).

Question 17

If a monopolist is producing a quantity where marginal revenue is equal to $32 and the marginal cost is equal to $30, the monopolist should:
A) increase production and lower the price to maximize profits.
B) decrease production and increase the price to maximize profits.
C) continue producing at the current price to maximize profits.
D) increase production and increase the price to maximize profits.
E) decrease production and decrease the price to maximize profits.

Accepted Answer

When marginal revenue equals marginal cost, the monopolist is producing the quantity that maximizes profits. However, at this quantity, the price charged may not be the profit-maximizing price. To maximize profits, the monopolist should increase production and lower the price until marginal revenue equals marginal cost again. Since the marginal cost is less than the marginal revenue, the monopolist can increase profit by producing one additional unit. Thus, the monopolist should choose to increase production and lower the price to maximize profits.

Question 18

The demand curve for Angel's Airport Shuttle is downward-sloping. With only this information, it can be concluded that Angel's Airport Shuttle:
A) is the only firm in the market for airport shuttles.
B) is currently maximizing profits.
C) is a price-maker.
D) makes economic profits.
E) should produce where the demand curve crosses marginal cost.

Accepted Answer

The fact that Angel's Airport Shuttle faces a downward-sloping demand curve means that it has some control over the price it charges, making it a price-maker. This is because if it were a price-taker, it would have to accept the market price, which would be set by the intersection of the market demand and supply curves. Since we do not have information on profits or market structure, choices (B), (D), and (E) cannot be determined from the given information. Additionally, choice (A) is incorrect since we do not know if there are other firms in the market.

Question 19

If a monopolist is producing a quantity where marginal revenue is equal to $16 and the marginal cost is equal to $17, the monopolist should:
A) increase production and lower the price to maximize profits.
B) decrease production and increase the price to maximize profits.
C) continue producing at the current price to maximize profits.
D) increase production and increase the price to maximize profits.
E) decrease production and decrease the price to maximize profits.

Accepted Answer

A monopolist maximizes profits where marginal revenue (MR) equals marginal cost (MC). In this case, the monopolist has a marginal revenue of $16 and a marginal cost of $17. Since the marginal cost is greater than the marginal revenue, the monopolist should decrease production and increase the price to maximize profits. Therefore, choice B is the best option.

Question 20

Refer to the accompanying figure to answer the  questions. 
-The profit-maximizing price and quantity are:
A) $34 and 20, respectively.
B) $26 and 20, respectively.
C) $18 and 20, respectively.
D) $18 and 30, respectively.
E) $13 and 20, respectively.

Accepted Answer

The answer of Refer to the accompanying figure to answer...

Quiz 10: Understanding Monopoly

When a monopolist lowers its price from $80 to $70, the quantity it is able to sell increases from 100 to 150. The change in revenue associated with the output effect is equal to:

Refer to the accompanying figure to answer the questions. -This firm:

Refer to the accompanying figure to answer the questions. -This profit-maximizing firm's total profit is equal to:

The profit made by this profit-maximizing firm is:

The profit-maximizing price for this firm is:

Which of the following is a characteristic of a monopoly but not a characteristic of a competitive market?

When the price changes from $50 to $30, the output effect leads to an increase of ____________ in revenue.

When the price changes from $50 to $30, the price effect leads to a loss of ____________ in revenue.

As production increases, the price consumers are willing to pay for the good:

When marginal revenue is positive, the:

The equation of a firm's marginal revenue curve is estimated to be price = 50 ? Q (quantity) , and the equations of their marginal cost curve is estimated to be price = 10 + 3Q. The profit-maximizing quantity for this firm is:

The equation of a firm's marginal revenue curve is estimated to be P = 50 ? Q (quantity) , and the equations of their marginal cost curve is estimated to be P = 10 + 3Q. The profit-maximizing price for this firm is:

The profit-maximizing quantity for this firm is:

If a monopolist is producing a quantity where marginal revenue is equal to $125 and the marginal cost is equal to $125, the monopolist should:

When a monopolist lowers a price from $80 to $70, the quantity that the firm is able to sell increases from 100 to 150. The change in revenue associated with the price effect is equal to:

At the profit-maximizing output in a monopoly-controlled market, the price a monopolist charges is:

If a monopolist is producing a quantity where marginal revenue is equal to $32 and the marginal cost is equal to $30, the monopolist should:

The demand curve for Angel's Airport Shuttle is downward-sloping. With only this information, it can be concluded that Angel's Airport Shuttle:

If a monopolist is producing a quantity where marginal revenue is equal to $16 and the marginal cost is equal to $17, the monopolist should:

Refer to the accompanying figure to answer the questions. -The profit-maximizing price and quantity are: