question

If a monopolist is earning zero profit in the short-run, then we know that:

answer

4) all of the above.

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A monopolistically competitive firm will try to earn a temporary profit by

answer

2) differentiating their product

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Jerry operates in the long run with (inverse) demand for his product of P(Q) = 50 - Q and a constant average and marginal cost of $2. If Jerry can successfully implement 1st degree price discrimination, how much profit will he earn?

answer

3)

$1,152

$1,152

question

When regulating a natural monopoly, the regulator should

answer

3)

set price equal to the average cost of production so that he firm breaks even

set price equal to the average cost of production so that he firm breaks even

question

The percentage change in quantity demanded that arises due to a one percent change in price is known as the ________, which is always a _________ number for non-Giffen goods.

answer

4) price elasticity of demand; negative

question

If a firm is operating on the lower half of its demand curve, then

answer

1) it should definitely raise its price since this would increase revenues and decrease costs.

question

If monopolistically competitive firms are losing money (i.e., earning a negative profit) which of the following best describes the adjustment to a long-run equilibrium?

answer

4) firms exit the market, demand for the remaining firms shifts out until the profit maximizing output for the remaining firms leads to zero profit.

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firm in a monopolistically competitive industry may try to differentiate itself by

answer

5) all of the above.

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Perfectly elastic demand implies

answer

5) all of the above.

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Demand being elastic implies that

answer

3) a given percentage change in price will result in a larger percentage change in quantity demanded.

question

A monopolist facing the following inverse demand and cost functions will choose to _____:

P = 100 - 5Q

TC = 500 + 10Q

MC = 10

P = 100 - 5Q

TC = 500 + 10Q

MC = 10

answer

2)

operate even though profits are negative

operate even though profits are negative

question

Monopolists

answer

3) face a downward sloping demand curve.

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Excess capacity refers to

answer

3) a situation where firms produce on the downward sloping portion of their long-run average cost curve.

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If a monopolist's inverse demand function is given by P = 10 - 2Q, then the monopolist's marginal revenue function is:

answer

3)

MR = 10 - 4Q

MR = 10 - 4Q

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In the short-run, a monopolist

answer

5) all of the above.

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For a single-price monopolist, marginal revenue is always

answer

2) less than price since the monopolist must lower price on all units in order to sell one more.

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When the price of umbrellas increased from $10 to $12, the weekly quantity demanded fell from 200 to 180. Approximately what is (the absolute value of) the price elasticity of demand for umbrellas?

answer

3)

0.58

0.58

question

If the income elasticity of demand for jeans is 3, then what change in income will lead to a 15% decrease in the quantity demanded?

answer

1)

a 5% decrease.

a 5% decrease.

question

When John opened John's Dogs Hotdog Stand, he offered a special introductory price of $0.50 per hotdog and sold 200 hotdogs in the first week. During the second week, John raised the price by 50% and he sold 30% fewer hotdogs. Assuming that demand is linear, what should John do in the third week if he wants to increase his revenues?

answer

3)

increase price since demand is inelastic

increase price since demand is inelastic

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In which of the following market structures might we see firms advertising?

answer

3)

monopolistic competition

monopolistic competition

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In the long-run, monopolistically competitive firms will

answer

1) have excess capacity.

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The (inverse) demand for widgets is given by P = 450 - 0.02Q. At a price of $250, we know that

answer

1)

demand is elastic

demand is elastic

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If the (inverse) demand for hotdogs at a baseball game is given by P = 10 - 0.1Q, what price will maximize the vendor's revenues?

answer

3)

$5.00

$5.00

question

To determine whether a good is normal or inferior, one should examine the

answer

4) income elasticity of demand.

question

Monosoft enjoys a monopoly in the production of a specific software package. The (inverse) market demand for this software is given by P(Q) = 260 - 2.5Q, Monosoft's total cost is given by TC(Q) = 500 + 10Q, and their marginal cost is given by MC(Q) = 10. What is Monosoft's profit maximizing output level?

answer

2)

50

50

question

Monosoft enjoys a monopoly in the production of a specific software package. The (inverse) market demand for this software is given by P(Q) = 260 - 2.5Q, Monosoft's total cost is given by TC(Q) = 500 + 10Q, and their marginal cost is given by MC(Q) = 10. What is Monosoft's profit maximizing price?

answer

3)

$135

$135

question

Monosoft enjoys a monopoly in the production of a specific software package. The (inverse) market demand for this software is given by P(Q) = 260 - 2.5Q, Monosoft's total cost is given by TC(Q) = 500 + 10Q, and their marginal cost is given by MC(Q) = 10. How much deadweight loss is caused by this monopoly?

answer

3)

$3,125

$3,125

question

Monosoft enjoys a monopoly in the production of a specific software package. The (inverse) market demand for this software is given by P(Q) = 260 - 2.5Q, Monosoft's total cost is given by TC(Q) = 500 + 10Q, and their marginal cost is given by MC(Q) = 10. What is Monosoft's profit?

answer

1)

$5,750

$5,750

question

Compared to a monopoly, a perfectly competitive industry

answer

1) charges a lower price and produces more output.

question

Student discounts are an example of

answer

4) 3rd degree price discrimination

question

A "natural monopoly" refers to a firm that has monopoly power because

answer

4) they enjoy economies of scale

question

A recent study showed that the income elasticity of demand for widgets is -0.27. Which of the following is true?

answer

1) widgets are an inferior good.

question

If quantity demanded falls from 50 to 25 when price increases from $1 to $2, then

answer

4)

price elasticity of demand is approximately -1 and demand is unitary elastic

price elasticity of demand is approximately -1 and demand is unitary elastic

question

For a good to be considered an economic necessity, what must be true?

answer

5) the income elasticity is between zero and one

question

Which of the following is NOT true regarding perfect competition and monopolistic competition?

answer

5) the income elasticity is between zero and one