question
A monopolist maximizes profits by setting:
a. marginal revenue equal to marginal cost.
b. marginal revenue greater than marginal cost. c. marginal revenue less than marginal cost. d. total revenue as high as possible.
a. marginal revenue equal to marginal cost.
b. marginal revenue greater than marginal cost. c. marginal revenue less than marginal cost. d. total revenue as high as possible.
answer
a. marginal revenue equal to marginal costs
question
When a monopolist sells two units of output its total revenues are $80. When the monopolist sells three units of output, its price per unit is $30. The monopolist's marginal revenue from selling the third unit of output is:
a. $5
b. $10
c. $22.50
d. $110
a. $5
b. $10
c. $22.50
d. $110
answer
b. $10
question
For a monopolist, marginal revenue ___________ for all units of output except the first unit.
a. is greater than the price of output
b. is less than the price of output
c. is equal to the price of output
d. may be either greater than or less than the price of output
a. is greater than the price of output
b. is less than the price of output
c. is equal to the price of output
d. may be either greater than or less than the price of output
answer
b. is less than the price of output
question
At a price of $10, the marginal revenue of a monopolist is $6. If the marginal cost of production is $8, what should the monopolist do in order to maximize profits?
a. Increase its price.
b. Decrease its price.
c. Keep its price at the same level. d. Not enough information to solve.
a. Increase its price.
b. Decrease its price.
c. Keep its price at the same level. d. Not enough information to solve.
answer
a. increase its price
because: the firm should produce less but that isn't an option in the answers so we choose the next best thing, which is increase the price because we want MC=MR
because: the firm should produce less but that isn't an option in the answers so we choose the next best thing, which is increase the price because we want MC=MR
question
If a regulatory agency mandates that a natural monopoly charge a price equal to its average cost:
a. the firm will eventually exit the industry.
b. the firm will earn economic profits greater than zero.
c. other firms will find it profitable to enter this industry.
d. the firm will earn economic profits equal to zero.
a. the firm will eventually exit the industry.
b. the firm will earn economic profits greater than zero.
c. other firms will find it profitable to enter this industry.
d. the firm will earn economic profits equal to zero.
answer
d. the firm will earn economic profit equal to zero
question
Firms price discriminate by offering customers with a _____ demand a lower price and customers with a ________ demand a higher price.
a.less inelastic; more inelastic.
b.more inelastic; less inelastic.
c.inferior; normal.
d. normal; inferior.
a.less inelastic; more inelastic.
b.more inelastic; less inelastic.
c.inferior; normal.
d. normal; inferior.
answer
a. less inelastic; more inelastic
trick answer; think of it backward --> more elastic; less elastic
trick answer; think of it backward --> more elastic; less elastic
question
Diminishing marginal returns imply that firms
a. require fewer and fewer workers to produce each additional unit of
output.
b. require more and more workers to produce each additional unit of output.
c. get decreasing amounts of revenue for each unit of output they
produce.
d. get increasing amounts of revenue for each unit of output they
produce.
a. require fewer and fewer workers to produce each additional unit of
output.
b. require more and more workers to produce each additional unit of output.
c. get decreasing amounts of revenue for each unit of output they
produce.
d. get increasing amounts of revenue for each unit of output they
produce.
answer
b. require more and more workers to produce each additional unit of output
question
#6 CH 8
Refer to Table 8.2 which gives a firm's production function. Assume that all non-labor inputs are fixed. Diminishing returns set in with the addition of the
a. third worker.
b. fourth worker.
c. fifth worker.
d. sixth worker.
Refer to Table 8.2 which gives a firm's production function. Assume that all non-labor inputs are fixed. Diminishing returns set in with the addition of the
a. third worker.
b. fourth worker.
c. fifth worker.
d. sixth worker.
answer
b. fourth worker
question
Marginal cost is defined as
a. total variable cost resulting from a one unit increase in quantity.
b. quantity resulting from a one unit increase in total variable cost.
c. the change in total variable cost resulting from a one unit increase in the change in quantity.
d. the change in quantity resulting from a one unit increase in the
change in total variable cost.
a. total variable cost resulting from a one unit increase in quantity.
b. quantity resulting from a one unit increase in total variable cost.
c. the change in total variable cost resulting from a one unit increase in the change in quantity.
d. the change in quantity resulting from a one unit increase in the
change in total variable cost.
answer
c. the change in total variable cost resulting from a one unit increase in the change in quantity
question
Average variable cost equals
a. total fixed cost plus total variable cost.
b. average total cost minus average fixed cost.
c. average total cost plus average fixed cost.
d. total cost minus average cost.
the change in quantity.
in total variable cost.
the change in quantity.
the change in quantity.
a. total fixed cost plus total variable cost.
b. average total cost minus average fixed cost.
c. average total cost plus average fixed cost.
d. total cost minus average cost.
the change in quantity.
in total variable cost.
the change in quantity.
the change in quantity.
answer
b. average total cost minus average fixed cost
question
#15 Ch 8
Table 8.4 presents the cost schedule for David's Figs. If David produces five figs, David's marginal costs are
a. $70
b. $74
c. $94 d. $100
Table 8.4 presents the cost schedule for David's Figs. If David produces five figs, David's marginal costs are
a. $70
b. $74
c. $94 d. $100
answer
a.
question
Average fixed costs in the short-run
a. increase as the quantity produced increases.
b. decrease as the quantity produced increases.
c. first decrease, then increase eventually as the quantity produced
increases.
d. first increase, then decrease eventually as the quantity produced
increases.
a. increase as the quantity produced increases.
b. decrease as the quantity produced increases.
c. first decrease, then increase eventually as the quantity produced
increases.
d. first increase, then decrease eventually as the quantity produced
increases.
answer
b.
question
In the long-run, total fixed costs
a. increase as the quantity produced increases.
b. decrease as the quantity produced increases.
c. first decrease, then increase eventually as the quantity produced
increases.
d. there are no fixed costs in the long-run.
a. increase as the quantity produced increases.
b. decrease as the quantity produced increases.
c. first decrease, then increase eventually as the quantity produced
increases.
d. there are no fixed costs in the long-run.
answer
d
question
Becauseindividualfirmscannotaffectthemarketpriceoftheirgood, for each firm in a competitive market:
a. price exceeds marginal revenue.
b. total revenue increases by more than the market price when an
additional unit is sold.
c. price is equal to marginal revenue.
d. price is less than marginal revenue.
a. price exceeds marginal revenue.
b. total revenue increases by more than the market price when an
additional unit is sold.
c. price is equal to marginal revenue.
d. price is less than marginal revenue.
answer
c.
question
#7 Ch9 Refer to Figure 9.1. The good is sold in a perfectly competitive market. If the market price of the good is $150 at the profit maximizing level of output, total profit is:
a. $0.
b. $4,000 c. $5,000 d. $30,000
a. $0.
b. $4,000 c. $5,000 d. $30,000
answer
b.
question
#8 Ch9
RefertoFigure9.1.Thefirm'sshort-runsupplycurveis a. the marginal cost curve above $150.
b. the marginal cost curve above $125.
c. the marginal cost curve above $100.
d. the marginal cost curve above $75.
RefertoFigure9.1.Thefirm'sshort-runsupplycurveis a. the marginal cost curve above $150.
b. the marginal cost curve above $125.
c. the marginal cost curve above $100.
d. the marginal cost curve above $75.
answer
c.
question
#9 Ch9 RefertoFigure9.1.Totalfixedcostis a. $4,000
b. $22,000
c. $26,000
d. not enough information to determine.
b. $22,000
c. $26,000
d. not enough information to determine.
answer
a.
question
A firm will not shut down in the short-run as long as:
a. price exceeds average fixed cost at the level of output where
marginal revenue equals marginal cost.
b. price exceeds average variable cost at the level of output where
marginal revenue equals marginal cost.
c. price exceeds marginal cost at the level of output where marginal
revenue equals marginal cost.
d. price exceeds total revenue at the level of output where marginal
revenue equals marginal.
a. price exceeds average fixed cost at the level of output where
marginal revenue equals marginal cost.
b. price exceeds average variable cost at the level of output where
marginal revenue equals marginal cost.
c. price exceeds marginal cost at the level of output where marginal
revenue equals marginal cost.
d. price exceeds total revenue at the level of output where marginal
revenue equals marginal.
answer
b.
question
Your firm is producing a good in a perfectly competitive market. If you know that when you produce 300 units per day, your total costs are $7000 and when you produce 301 units your total costs are $7001, then:
a. you are maximizing profits if the price of the good is $5.
b. you will be able to increase firm profits by decreasing output if the market price of your good is $5.
c. you will be able to increase firm profits by increasing output if the market price of your good is $5.
d. your average costs are increasing.
a. you are maximizing profits if the price of the good is $5.
b. you will be able to increase firm profits by decreasing output if the market price of your good is $5.
c. you will be able to increase firm profits by increasing output if the market price of your good is $5.
d. your average costs are increasing.
answer
c.
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