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| 1 | |
A particular firm would most likely be classified a monopoly if: |
| | A) | it produces a good for which market demand was highly elastic |
| | B) | it has very little control over the price |
| | C) | entry into the industry is blocked |
| | D) | it produces a good for which there are many close substitutes |
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| 2 | |
If a monopolist's demand curve is elastic: |
| | A) | total revenue will fall if price is reduced |
| | B) | marginal revenue will equal price |
| | C) | it cannot possibly be maximizing profits |
| | D) | marginal revenue is positive |
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| 3 | |
Which combination of price, marginal cost, and marginal revenue is consistent with a pure monopolist maximizing profits? |
| | A) | P = $30, MR = $10, MC = $10 |
| | B) | P = $8, MR = $5, MC = $8 |
| | C) | P = $15, MR = -$2, MC = $2 |
| | D) | P = $40, MR = $20, MC = $10 |
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| 4 | |
Consider a monopolistic firm for which the following data are relevant. P = $50, MC = $40, coefficient of price elasticity of demand = 0.8. This firm: |
| | A) | is maximizing profit |
| | B) | should raise its price |
| | C) | should lower its price |
| | D) | should shut down |
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| 5 | |
A monopolist is currently producing the output that maximizes its total revenue. It must also be the case that: |
| | A) | marginal revenue equals marginal cost |
| | B) | the firm's profits are maximized |
| | C) | marginal revenue is zero |
| | D) | demand is elastic |
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| 6 | |
Use the following diagram of a pure monopolist to answer the next question.
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Refer to the diagram. Which of the following is a correct statement? |
| | A) | Maximum profits are obtained by selling at price $a |
| | B) | Maximum profits are obtained by producing output g |
| | C) | The firm's per-unit profits are $c - $a |
| | D) | Demand is elastic at price $c |
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| 7 | |
Consider the following data for a nondiscriminating monopolist: P = $25, Q = 100, MR = $12, ATC = $8, MC = $12. This monopolist: |
| | A) | is earning maximum profits of $1700 |
| | B) | could increase profits by lowering price and increasing production |
| | C) | could increase profits by lowering price and reducing production |
| | D) | could increase profits by raising price and reducing production |
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| 8 | |
Answer the next question on the basis of the following demand and cost data for a nondiscriminating monopolist.
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Refer to the data. What is the profit-maximizing price and output for this monopolist? |
| | A) | $16 and 3 |
| | B) | $14 and 4 |
| | C) | $12 and 5 |
| | D) | $10 and 6 |
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| 9 | |
Consider the following data for a nondiscriminating monopolist: P = $20, Q = 100, MR = $10, ATC = $22, AVC = $18, MC = $10. This monopolist: |
| | A) | could increasing profits by lowering price and increasing production |
| | B) | should shut down immediately |
| | C) | is minimizing its losses at the current price and output |
| | D) | could increase profits by raising price and reducing production |
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| 10 | |
The allocative inefficiency of nondiscriminating monopoly arises from the fact that: |
| | A) | price exceeds marginal cost |
| | B) | output falls short of the output at which average cost is minimized |
| | C) | output exceeds that at which average cost is minimized |
| | D) | price exceeds minimum average cost |
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