Managerial Econ. ch.8 - Custom Scholars
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# Managerial Econ. ch.8

question
You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 78 - 15Q, where Q = Q1+ Q2 The marginal costs associated with producing in thetwo plants are MC1= 3Q1and MC2 = 2Q2How much output should be produced in plant 1 inorder to maximize profits?
A. 1
B. 2
C. 3
D. 4
answer
1
question
You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 78 - 15Q, where Q = Q1+ Q2. The marginal costs associated with producing in the two plants are MC 1= 3Q1and MC2= 2Q2 What price should be charged to maximize profits?
A.\$20.5
B.\$40.5
C.\$60.5
D.\$80.5
answer
40.5
question
You are the manager of a firm that produces output in two plants. The demand for your firm's
product is P = 78 - 15Q, where Q = Q
1+ Q2 The marginal costs associated with producing in the two plants are MC1= 3Q1and MC2= 2Q2What price should be charged in order to maximize
revenues?
A.\$39
B.\$47
C.\$52
D.\$56
answer
39
question
Which of the following is true under monopoly?
A.Profits are always positive.
B.P > MC.
C.P = MR.
D.All of the choices are true for monopoly.
answer
P > MC.
question
You are the manager of a firm that sells its product in a competitive market at a price of \$50. Your firm's cost function is C = 40 + 5Q2. The profit-maximizing output for your firm is:
A.4/5.
B.10.
C.5.
D.45.
answer
5
question
You are the manager of a firm that sells its product in a competitive market at a price of \$50. Your firm's cost function is C = 40 + 5Q2 Your firm's maximum profits are:
A.125.
B.250.
C.100.
D.85.
answer
85
question
You are the manager of a monopoly that faces a demand curve described by P = 230 - 20Q. Your costs are C = 5 + 30Q. The profit-maximizing output for your firm is:
A.4.
B.5.
C.6.
D.7.
answer
5
question
You are the manager of a monopoly that faces a demand curve described by P = 230 - 20Q. Your costs are C = 5 + 30Q. The profit-maximizing price is:
A.150.
B.90.
C.130.
D.110.
answer
130
question
You are the manager of a monopoly that faces a demand curve described by P = 230 - 20Q. Your costs are C = 5 + 30Q. Your firm's maximum profits are:
A.495.
B.475.
C.480.
D.415.
answer
495
question
You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 120 - 6Q, where Q = Q1+ Q2. The marginal costs associated with producing in the two plants are MC
1= 2Q1 and MC2= 4Q2. How much output should be produced in plant 1 in order to maximize profits?
A.3
B.6
C.9
D.12
answer
6
question
You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 120 - 6Q, where Q = Q
1+ Q2 The marginal costs associated with producing in the two plants are MC1 = 2Q1 and MC2 = 4Q. What price should be charged to maximize profits?
A.60
B.66
C.70
D.76
answer
66
question
You are the manager of a firm that produces output in two plants. The demand for your firms product is P = 120 - 6Q, where Q = Q1 + Q2. The marginal costs associated with producing in the two plants are MC1 = 2Q1 and MC2= 4Q2 What price should be charged in order to maximize revenues?
A.6
B.2
C.24
D.60
answer
60
question
In a competitive industry with identical firms, long-run equilibrium is characterized by:
A.P = AC.
B.P = MC.
C.MR = MC.
D.All of the statements associated with this question are correct.
answer
All of the statements associated with this question are correct.
question
Which of the following is true?
A. A monopolist produces on the inelastic portion of its demand.
B. A monopolist always earns an economic profit.
C.The more inelastic the demand, the closer marginal revenue is to price.
D. In the short run, a monopoly will shut down if P < AVC.
answer
In the short run, a monopoly will shut down if P < AVC.
question
You are the manager of a firm that sells its product in a competitive market at a price of \$40. Your firm's cost function is C = 60 + 4Q2 The profit-maximizing output for your firm is:
A.4.
B.5.
C.10.
D.15.
answer
5
question
You are the manager of a firm that sells its product in a competitive market at a price of \$40. Your firm's cost function is C = 60 + 4Q2 Your firm's maximum profits are:
A.36.
B.60.
C.40.
D.80.
answer
40
question
You are the manager of a monopoly that faces a demand curve described by P = 85 - 5Q. Your costs are C = 20 + 5Q. The profit-maximizing output for your firm is:
A.6.
B.5.
C.7.
D.8.
answer
8
question
You are the manager of a monopoly that faces a demand curve described by P = 85 - 5Q. Your costs are C = 20 + 5Q. The profit-maximizing price is:
A.45.
B.55.
C.60.
D.50.
answer
45
question
You are the manager of a monopoly that faces a demand curve described by P = 85 - 5Q. Your costs are C = 20 + 5Q. The revenue-maximizing output is:
A.85.
B.9.
C.10.
D.None of the answers is correct.
answer
None of the answers is correct.
question
You are the manager of a firm that sells its product in a competitive market at a price of \$60. Your firm's cost function is C = 50 + 3Q2 The profit-maximizing output for your firm is:
A.10.
B.20.
C.30.
D.40.
answer
10
question
You are the manager of a firm that sells its product in a competitive market at a price of \$60. Your firm's cost function is C = 50 + 3Q2 Your firm's maximum profits are:
A.250.
B.400.
C.450.
D.500.
answer
250
question
You are the manager of a monopoly that faces a demand curve described by P = 63 - 5Q. Your costs are C = 10 + 3Q. The profit-maximizing output for your firm is:
A.3.
B.4.
C.5.
D.6.
answer
6
question
You are the manager of a monopoly that faces a demand curve described by P = 63 - 5Q. Your costs are C = 10 + 3Q. The profit-maximizing price is:
A.20.
B.27.
C.33.
D.55.
answer
33
question
You are the manager of a monopoly that faces a demand curve described by P = 63 - 5Q. Your costs are C = 10 + 3Q. Your firm's maximum profits are:
A.0.
B.66.
C.120.
D.170.
answer
170
question
You are the manager of a monopoly that faces a demand curve described by P = 63 - 5Q. Your costs are C = 10 + 3Q. The revenue-maximizing output is:
A.10/63.
B.5.
C.6.3.
D.None of the answers is correct.
answer
6.3
question
Which of the following is true under monopoly?
A.Profits are always positive.
B.P > minimum of ATC.
C.P = MR.
D.None of the answers is correct.
answer
None of the answers is correct.
question
In the long run, monopolistically competitive firms:
A. charge prices equal to marginal cost.
B. have excess capacity.
C. produce at the minimum of average total cost.
D. have excess capacity and produce at the minimum of average total cost.
answer
have excess capacity.
question
If a monopolistically competitive firm's marginal cost increases, then in order to maximize profits,
the firm will:
A.reduce output and increase price.
B.increase output and decrease price.
C.increase both output and price.
D.reduce both output and price.
answer
reduce output and increase price.
question
Which of the following market structures would you expect to yield the greatest product variety?
A.Monopoly
B.Monopolistic competition
C.Bertrand oligopoly
D.Perfect competition
answer
Monopolistic competition
question
The primary difference between monopolistic competition and perfect competition is:
A.the ease of entry and exit into the industry.
B.the number of firms in the market.
C.Both the ease of entry and exit into the industry and the number of firms in the market are correct.
D. None of the answers is correct.
answer
None of the answers is correct.
question
Which of the following industries is best characterized as monopolistically competitive?
A.Toothpaste
B.Crude oil
C.Agriculture
D.Local telephone service
answer
Toothpaste
question
Which of the following is an example of monopoly?
A.Shoe industry in the United States
B.Local utility industry in a small town
C.Newspaper industry in New York City
D.Bread industry in New York City
answer
Local utility industry in a small town
question
Differentiated goods are a feature of a:
A.perfectly competitive market.
B.monopolistically competitive market.
C.monopolistic market.
D.monopolistically competitive market and monopolistic market.
answer
monopolistically competitive market.
question
Firms have market power in:
A.perfectly competitive markets.
B.monopolistically competitive markets.
C.monopolistic markets.
D.monopolistically competitive markets and monopolistic markets.
answer
monopolistically competitive markets and monopolistic markets.
question
There is no market supply curve in:
A. a perfectly competitive market.
B. a monopolistically competitive market.
C. a monopolistic market.
D. monopolistically competitive and monopolistic markets.
answer
monopolistically competitive and monopolistic markets.
question
Suppose that initially the price is \$50 in a perfectly competitive market. Firms are making zero economic profits. Then the market demand shrinks permanently, some firms leave the industry,
and the industry returns to a long-run equilibrium. What will be the new equilibrium price, assuming cost conditions in the industry remain constant?
A. \$50
B. \$45
C. Lower than \$50, but exact value cannot be known without more information.
D. Larger than \$45, but exact value cannot be known without more information.
answer
50
question
Which of the following statements concerning monopoly is NOT true?
A. A market may be monopolistic because there are some legal barriers.
B. A monopoly has market power.
C. A monopoly is always undesirable.
D. There is some deadweight loss in a monopolistic market.
answer
A monopoly is always undesirable.
question
Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets?
A. Firms produce homogeneous goods.
B. There is free entry.
C. Long-run profits are zero.
D. There is free entry and long-run profits are zero.
answer
There is free entry and long-run profits are zero.
question
The source(s) of monopoly power for a monopoly may be:
A. economies of scale.
B. economies of scope.
C. patents.
D. All of the statements associated with this question are correct.
answer
All of the statements associated with this question are correct.
question
Economies of scale exist whenever:
A. average total costs decline as output increases.
B. average total costs increase as output increases.
C. average total costs are stationary as output increases.
D. average total costs increase as output increases and average total costs are stationary as output increases.
answer
average total costs decline as output increases.
question
The number of efficient plants compatible with domestic consumption of the refrigerator industry in
Sweden is 0.7. Which of the following implications is(are) correct?
A. In the absence of imports, the refrigerator industry in Sweden is monopolistic.
B. The refrigerator industry in Sweden is perfectly competitive.
C. The refrigerator industry in Sweden is monopolistically competitive.
D. None of the answers is correct.
answer
In the absence of imports, the refrigerator industry in Sweden is monopolistic.
question
A monopoly has two production plants with cost functions C
1 = 50 + 0.1Q12 and C2 = 30 + 0.05Q22. The demand it faces is Q = 500 - 10P. What is the condition for profit maximization?
A. MC1(Q1) = MC2(Q2) = P(Q1 + Q2).
B. MC1(Q1) = MC2(Q2) = MR(Q1 + Q2).
C. MC1(Q1 + Q2) = MC2(Q1 + Q2) = P (Q1 + Q2).
D. MC1(Q1 + Q2) = MC2(Q1 + Q2) = MR (Q1 + Q2).
answer
MC1(Q1) = MC2(Q2) = MR(Q1 + Q2).
question
A monopoly has two production plants with cost functions C
1= 50 + 0.1Q12and C2= 30 + 0.05Q22. The demand it faces is Q = 500 - 10P. What is the profit-maximizing level of output?
A.Q1 = 62.5; Q2 = 125.
B.Q1 = 125; Q2 = 62.5.
C.Q1 = Q2 = 125.
D.Q1 = Q2 = 62.5.
answer
Q1 = 62.5; Q2 = 125.
question
A monopoly has two production plants with cost functions C1= 50 + 0.1Q12 and C2= 30 + 0.05Q22. The demand it faces is Q = 500 - 10P. What is the profit-maximizing price?
A. \$12.5 per unit
B. \$6.25 per unit
C. \$31.25 per unit
D. \$18.75 per unit
answer
31.25 per unit
question
Which of the following is a correct representation of the profit maximization condition for a
monopoly?
A. P = MR
B. MC = MR
C. P = ATC + MR
D. MR = MC + ATC
answer
MC = MR
question
Let the demand function for a product be Q = 100 - 2P. The inverse demand function of this
demand function is:
A. Q = 100 + 2P.
B. P = 50 - 0.5Q.
C. P = 50 + 0.5Q.
D. None of the answers is correct.
answer
P = 50 - 0.5Q.
question
A linear demand function exhibits:
A. constant demand elasticity.
B. more elastic demand as output increases.
C. less elastic demand as output increases.
D. insufficient information to determine.
answer
less elastic demand as output increases.
question
Which of the following is NOT a basic feature of a monopolistically competitive industry?
A. There are many buyers and sellers in the industry.
B. Each firm in the industry produces a differentiated product.
C. There is free entry and exit into the industry.
D. Each firm owns a patent on its product.
answer
Each firm owns a patent on its product.
question
In the long run, monopolistically competitive firms produce a level of output such that:
A. P > MC.
B. P = ATC.
C. ATC > minimum of average costs.
D. All of the statements associated with this question are correct.
answer
All of the statements associated with this question are correct.
question
Chris raises cows and produces cheese and milk because he enjoys:
A. economies of scale.
B. economies of scope.
C. cost complementarity.
D. None of the answers is correct.
answer
economies of scope.
question
What contributes to the existence of multiproduct firms?
A. Economies of scale
B. Economies of scope
C. Cost complementarity
D. Economies of scope and cost complementarity
answer
Economies of scope and cost complementarity
question
Which of the following is(are) basic feature(s) of a perfectly competitive industry?
A. Buyers and sellers have perfect information.
B. There are no transaction costs.
C. There is free entry and exit in the market.
D. All of the statements associated with this question are correct.
answer
All of the statements associated with this question are correct.
question
In the long run, perfectly competitive firms produce a level of output such that:
A. P = MC.
B. P = minimum of AC.
C. P = MC and P = minimum of AC.
D. None of the answers is correct.
answer
P = MC and P = minimum of AC.
question
A monopoly has produced a product with a patent for the last few years. The patent is going to expire. What will likely happen to the demand for the patent-holder's product when the patent runs
out?
A. Demand will increase.
B. Demand will decline.
C. Nothing.
D. None of the answers is correct.
answer
Demand will decline.
question
A monopoly has produced a product with a patent for the last few years. The patent is going to
expire. What will happen after the patent expires?
A. The incumbent will leave the market.
B. The incumbent will retain its status as a monopoly but produce at a lower price.
C. Some firms will enter the industry.
D. None of the answers is correct.
answer
Some firms will enter the industry.
question
You are a manager in a perfectly competitive market. The price is \$14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q2 What level of output should you produce in the short run?
A.5
B.8
C.10
D.15
answer
10
question
You are a manager in a perfectly competitive market. The price in your market is \$14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q 2 What price should you charge in the short run?
A. \$12
B. \$14
C. \$16
D. \$18
answer
14
question
You are a manager in a perfectly competitive market. The price in your market is \$14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q 2 What level of profits will you make in the short run?
A.\$20
B.\$40
C.\$60
D.\$80
answer
40
question
You are a manager in a perfectly competitive market. The price in your market is \$14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q2 What will happen in the long run if there is no change in the
demand curve?
A. Some firms will leave the market eventually.
B. Some firms will enter the market eventually.
C.There will be neither entry nor exit from the market.
D.None of the answers is correct.
answer
Some firms will enter the market eventually.
question
A perfectly competitive firm faces a:
A. perfectly elastic demand function.
B.perfectly inelastic demand function.
C.demand function with unitary elasticity.
D. None of the answers is correct.
answer
perfectly elastic demand function.
question
A firm has a total cost function of C(Q) = 50 + 10Q1/2. The firm experiences:
A.economies of scale.
B.constant returns to scale.
C.diseconomies of scale.
D.All of the statements associated with this question are correct, depending on the quantity.
answer
economies of scale.
question
A firm can produce two products with the cost function C(Q1, Q2) = 10 + 5Q+5Q2 - 0.2Q1Q2 The firm enjoys:
A.economies of scale in the two products separately.
B.economies of scope.
C.cost complementarity.
D.economies of scale in the two products separately and cost complementarity.
answer
cost complementarity.
question
"Monopolistic competition is literally a kind of competition. Hence, there is no deadweight loss in a monopolistically competitive market."
A.The statement is by definition correct but empirically incorrect.
B. The statement is correct.
C. The statement is incorrect.
D. None of the answers is correct.
answer
The statement is incorrect.
question
Eric provides cheese (H) and milk (M) to the market with the following total cost function: C(H, M)= 10 + 0.4H2+ 0.2M2. The prices of cheese and milk in the market are \$2 and \$5 respectively. Assume that the cheese and milk markets are perfectly competitive. What output of cheese maximizes profits?
A.2
B.2.5
C.5
D.10
answer
2.5
question
Eric provides cheese (H) and milk (M) to the market with the following total cost function: C(H, M)= 10 + 0.4H2 + 0.2M2. The prices of cheese and milk in the market are \$2 and \$5 respectively. Assume that the cheese and milk markets are perfectly competitive. What output of milk maximizes profits?
A.1.25
B.12.5
C.15
D.20
answer
12.5
question
You are a manager for a monopolistically competitive firm. From experience, the profit-maximizing level of output of your firm is 100 units. However, it is expected that prices of other close substitutes will fall in the near future. How should you adjust your level of production in response to this change?
A. Produce more than 100 units.
B. Produce less than 100 units.
C. Produce 100 units.
D. Insufficient information to decide.
answer
Produce less than 100 units
question
Which of the following statements is NOT correct about monopoly?
A. A monopolist generally faces a downward-sloping demand curve.
B. Monopolists always make positive profits in the long run.
C. A monopoly may make negative profits in the short run.
D. There is no close substitute for a monopoly's product.
answer
Monopolists always make positive profits in the long run.
question
You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 20 - Q, where Q = Q1 + Q2. The marginal costs associated with producing in the two plants are MC1 = 2 and MC = 2Q2 How much output should be produced in plant 1 in order to maximize profits?
A.1
B.4
C.8
D.11
answer
8
question
You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 20 - Q, where Q = Q1 + Q2. The marginal costs associated with producing in the two plants are MC1 = 2 and MC2 = 2Q2 What is the profit-maximizing price that the firm should charge?
A.\$8
B.\$9
C.\$11
D.\$12
answer
11
question
Which of the following is true under monopoly?
A.P > ATC
B.P > MC
C.P = MR
D.P = ATC
answer
P > MC
question
You are the manager of a firm that sells its product in a competitive market at a price of \$60. Your
firm's cost function is C = 33 + 3Q 2 The profit-maximizing output for your firm is:
A.3.
B.5.
C.6.
D.10.
answer
10
question
You are the manager of a monopoly that faces an inverse demand curve described by P = 200 -15Q. Your costs are C = 15 + 20Q. The profit-maximizing price is:
A.\$20.
B.\$110.
C.\$135.
D.\$290.
answer
110
question
Which of the following industries is best characterized as monopolistically competitive?
A.Cereal
B.Crude oil
C.Wheat
D.Local electricity service
answer
Cereal
question
Differentiated goods are NOT a feature of a:
A.perfectly competitive market.
B.monopolistically competitive market.
C.monopolistic market.
D.perfectly competitive market and monopolistic market.
answer
perfectly competitive market and monopolistic market.
question
One of the sources of monopoly power for a monopoly may be:
A.diseconomies of scale.
B.differentiated products.
C.patents.
D.free entry and exit.
answer
patents.
question
Let the demand function for a product be Q = 50 - 5P. The inverse demand function of this demand function is:
A.Q = 25 + P
B.P = 10 - 0.2Q
C.P = 10 + 0.2Q
D. P = 50 - 0.2Q
answer
P = 10 - 0.2Q
question
A firm has a total cost function of C(Q) = 75 + 25Q1/2. The firm experiences:
A.economies of scale.
B.diseconomies of scale.
C.constant returns to scale.
D.All of the statements associated with this question are correct.
answer
economies of scale.
question
In a competitive industry with identical firms, long-run equilibrium is characterized by:
A.P > AC.
B.P < MC.
C.MR = MC.
D.MR < P.
answer
MR = MC.
question
You are the manager of a firm that sells its product in a competitive market at a price of \$48. Your firm's cost function is C = 60 + 2Q 2 Your firm's maximum profits are:
A.\$192.
B.\$228.
C.\$348.
D.\$576.
answer
228
question
n the long run, monopolistically competitive firms charge prices:
A. equal to marginal cost.
B.below marginal cost.
C.equal to the minimum of average total cost.
D.above the minimum of average total cost.
answer
above the minimum of average total cost.
question
There is a market supply curve in a:
A.perfectly competitive market.
B.monopolistically competitive market.
C.monopolistic market.
D.perfectly competitive market and monopolistically competitive market.
answer
perfectly competitive market.
question
Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets?
A.Firms produce homogeneous goods.
B.Prices are equal to marginal costs in the long run.
C.Long-run profits are zero.
D.Prices are above marginal costs in the long run.
answer
Long-run profits are zero.
question
Consider a monopoly where the inverse demand for its product is given by P = 200 - 5Q. Based on this information, the marginal revenue function is:
A.MR(Q) = 400 - 2.5Q.
B.MR(Q) = 400 - 10Q.
C.MR(Q) = 200 - 10Q.
D.MR(Q) = 200 - 2.5Q.
answer
MR(Q) = 200 - 10Q.
question
Consider a monopoly where the inverse demand for its product is given by P = 50 - 2Q. Total costs for this monopolist are estimated to be C(Q) = 100 + 2Q + Q2At the profit-maximizing combination of output and price, deadweight loss is:
A.\$32.
B.\$64.
C.\$128.
D.cannot be determined with the given information.
answer
32
question
Consider a monopoly where the inverse demand for its product is given by P = 50 - 2Q. Total costs for this monopolist are estimated to be C(Q) = 100 + 2Q + Q2 At the profit-maximizing combination of output and price, consumer surplus is:
A.\$32.
B.\$64.
C.\$128.
D.cannot be determined with the given information.
answer
64
question
Consider a monopoly where the inverse demand for its product is given by P = 50 - 2Q. Total costs for this monopolist are estimated to be C(Q) = 100 + 2Q + Q2 At the profit-maximizing combination of output and price, monopoly profit is:
A.\$32.
B.\$64.
C.\$92.
D.\$128.
answer
92
question
Suppose perfectly competitive market conditions are characterized by the following inverse demand and inverse supply functions: P = 100 - 5Q and P = 10 + 5Q. The demand curve facing an individual firm operating in this market is:
A.P = 100 - 5Q.
B.a horizontal line at \$9.
C.a horizontal line at \$55.
D.P/N = (100 - 5Q)/N, where N is the total number of firms in the competitive market.
answer
a horizontal line at \$55.
question
Which of the following is true about where a profit-maximizing monopoly will produce on a linear demand curve when it has positive marginal costs?
A.It will produce output on the inelastic portion of the demand curve.
B.It will produce output where MR < 0.
C.It will produce output where MR = 0.
D.It will produce output on the elastic portion of the demand curve.
answer
It will produce output on the elastic portion of the demand curve.
question
Suppose a monopolist knows the own price elasticity of demand for its product is -3 and that its marginal cost of production is constant MC(Q) = 10. To maximize its profit, the monopoly price is:
A.\$1.50 per unit.
B.\$6.67 per unit.
C.\$10 per unit.
D.\$15 per unit.
answer
15 per unit
question
Compute the marginal revenue when the price elasticity of demand is -0.25.
A.-3P, meaning marginal revenue is negative and 3 times greater than price.
B.3P, meaning marginal revenue is positive and 3 times greater than price.
C.-0.33P, meaning that marginal revenue is negative and one-third of the price.
D.-0.25P, meaning that marginal revenue is negative and one-fourth of the price.
answer
-3P, meaning marginal revenue is negative and 3 times greater than price.
question
Suppose that a monopolistically competitive market is at the long-run equilibrium. Based on this information, which of the following conclusions is NOT true?
A.P > MC.
B.Deadweight loss is zero.
C.P = ATC > minimum of ATC.
D. Firms' profits are zero.
answer
Deadweight loss is zero.
question
The first-order conditions for a monopoly to maximize profits are:
A.dR(Q)/dQ = dC(Q)/dQ.
B.MR(Q) = MC(Q).
C.dπ(Q)/dQ = 0.
D.All of the statements associated with this question are correct.
answer
All of the statements associated with this question are correct.
question
Consider firms operating in an industry where the own price elasticity of demand is infinite; that is, Eqp=-infinity. Use this information to determine the type of industry in which these firms operate and the optimal advertising-to-sales ratio.
A.Perfectly competitive industry and 0
B.Monopolistically competitive industry and infinity
C.Perfectly competitive industry and infinity
D. Monopolistic industry and 0
answer
A.Perfectly competitive industry and 0
question
SeaSide Industries currently spends 5 percent of its sales on advertising. Suppose that the elasticity of advertising for Seaside is 0.2. Determine the optimal profit margin over price (P -MC)/P.
A.4 percent
B.10 percent
C.25 percent
D.None of the answers is correct.
answer
25 percent
question
Which of the following is a strategy(ies) used by firms in monopolistically competitive industries to convince consumers that their product is better than their rivals' products?
A. Comparative advertising
B. Niche marketing
C.Equity marketing
D.Comparative advertising or niche marketing
answer
Comparative advertising or niche marketing
question
Which of the following conditions must hold to ensure that profits are, in fact, at a maximum?
A.d(MC(Q))/dQ > 0
B.d(MC(Q))/dQ < 0
C.d2π(Q)/dQ2 < 0
D.d(MC(Q))/dQ > 0 and d2π(Q)/dQ2< 0
answer
d(MC(Q))/dQ > 0 and d2π(Q)/dQ2< 0
question
The second-order condition for a firm maximizing its profit operating in a monopolistically competitive market is:
A.-(d2C(Q)/dQ2) < 0.
B. (d2R (Q)/dQ2) - (d2C(Q)/dQ2) < 0.
C.(d2R (Q)/dQ2) = (d2C(Q)/dQ2).
D. (dMR/dQ) > (dMC/dQ).
answer
(d2R (Q)/dQ2) - (d2C(Q)/dQ2) < 0.
question
The first-order condition for a firm maximizing its profit operating in a monopolistically competitive market is:
A.(dMR/dQ) = (dMC/dQ).
B.P - (dC(Q)/dQ) = 0.
C.(dR(Q)/dQ) - (dC(Q)/dQ) = 0.
D.(dMR/dQ) < (dMC/dQ).
answer
(dR(Q)/dQ) - (dC(Q)/dQ) = 0.
question
The second-order condition for a monopoly maximizing its profit is:
A.(d2R(Q)/dQ2) - (d2C(Q)/dQ2) < 0.
B.(d2R(Q)/dQ2) - (d2C(Q)/dQ2) = 0.
C.(dMR/dQ) < (dMC/dQ).
D.(d2R(Q)/dQ2) - (d2C(Q)/dQ2) < 0 or (dMR/dQ) < (dMC/dQ).
answer
(d2R(Q)/dQ2) - (d2C(Q)/dQ2) < 0 or (dMR/dQ) < (dMC/dQ).
question
The first-order condition for a monopoly maximizing its profit is:
A.P - (dC(Q)/dQ) = 0.
B.(dR(Q)/dQ) - (dC(Q)/dQ) = 0.
C.(dR(Q)/dQ) - (dC(Q)/dQ) < 0.
D.(d2R(Q)/dQ2) - (d2C(Q)/dQ2) < 0.
answer
(dR(Q)/dQ) - (dC(Q)/dQ) = 0.
question
The second-order condition for a firm maximizing its profits operating in a perfectly competitive market is:
A.(d2π/dQ2) < 0.
B.- (d2C(Q)/dQ2) < 0.
C.- (dMC/dQ) < 0.
D.All of the statements associated with this question are correct.
answer
All of the statements associated with this question are correct.
question
The first-order conditions for profit maximization in a perfectly competitive market are:
A. P - (dC(Q)/dQ) = 0.
B. (dR(Q)/dQ) - (d2C(Q)/dQ2) < 0.
C.P - (d2C(Q)/dQ2) = 0.
D. P > (dC(Q)/dQ).
answer
P - (dC(Q)/dQ) = 0.
question
You are the manager of a firm that sells its product in a competitive market with market (inverse) demand given by P = 50 - 0.5Q. The market equilibrium price is \$50. Your firm's cost function is C= 40 + 5Q 2 Your firm's marginal revenue is:
A.\$50.
B.MR(Q) = 10Q.
C.MR(Q) = 50 - Q.
D.There is insufficient information to determine the firm's marginal revenue.
answer
50
question
You are the manager of a firm that sells its product in a monopolistically competitive market with (inverse) demand given by P = 50 - 0.5Q. Your firm's cost function is C = 40 + 5Q2 Your firm's
marginal revenue is:
A. P = 50 - 0.5Q.
B. P = 50 - Q.
C. P = 100 - Q.
D. There is insufficient information to determine the firm's marginal revenue.
answer
P = 50 - Q.
question
You are the manager of a monopoly firm with (inverse) demand given by P = 50 - 0.5Q. Your firm's cost function is C = 40 + 5Q2. Your firm's marginal revenue is:
A.P = 50 - 0.5Q.
B.P = 100 - Q.
C.P = 50 - Q.
D.There is insufficient information to determine the firm's marginal revenue.
answer
P = 50 - Q.
question
Which of the following formulas correctly measures the profit of a monopoly?
A.π= TR - TC
B.π = (P - ATC)Q
C.π = (P - AVC)Q
D.π= TR - TC andπ = (P - ATC)Q
answer
π= TR - TC andπ = (P - ATC)Q
question
Which of the following is true under monopolistic competition in the short run?
A.Profits are always zero.
B.P > MC.
C.P = MR.
D.All of the choices are true in monopolistic competition.
answer
P > MC.
question
Which of the following is true under monopolistic competition in the long run?
A.Profits are always zero.
B.P > MC.
C.P = MR.
D.All of the choices are true in monopolistic competition.
answer
Profits are always zero.
question
Which of the following is true under perfect competition?
A.Profits are always positive.
B.P > MC.
C.P = MR.
D.All of the choices are true for perfect competition.
answer
P = MR.
question
In a competitive industry with identical firms, long-run equilibrium is characterized by:
A.P > min ATC.
B.P < AVC.
C.MR = MC = min ATC.
D.MR < P.
answer
MR = MC = min ATC.
question
In a monopoly where the marginal revenue and price are, respectively, given by \$10 and \$20, the
price elasticity of demand is:
A.-1.
B.-2.
C.-0.5.
D.Cannot be determined based on the information in the question.
answer
-2
question
In a monopoly where the marginal revenue and price are, respectively, given by \$0.50 and \$2, the price elasticity of demand is:
A.-0.75.
B.-1.
C.-5/4.
D.-4/3.
answer
-4/3
question
You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 96 - 15Q, where Q = Q1 + Q2 The marginal costs associated with producing in the two plants are MC1= 6Q1and MC2= 3Q2. How much output should be produced in plant 2 in order to maximize profits?
A.1
B.2
C.3
D.4
answer
2
question
In a monopoly where the marginal revenue and price are, respectively, given by \$3 and \$6, the price elasticity of demand is:
A.-0.5.
B.-1.
C.-1.5.
D.-2.
answer
-2
question
Clark Industries currently spends 5 percent of its sales on advertising. Suppose that the elasticity of advertising for Clark is 0.25. Determine the optimal profit margin over price (P - MC)/P.
A.15 percent.
B.20 percent.
C.25 percent.
D. None of the answers is correct.
answer
20 percent
question
Compute the marginal revenue when the price elasticity of demand is -0.10.
A.-9P, meaning marginal revenue is negative and 9 times greater than price.
B.9P, meaning marginal revenue is positive and 9 times greater than price.
C.-3P, meaning marginal revenue is negative and 3 times greater than price.
D.3P, meaning marginal revenue is positive and 3 times greater than price.
answer
-9P, meaning marginal revenue is negative and 9 times greater than price.
question
Consider a monopoly where the inverse demand for its product is given by P = 80 - 2Q. Total costs for this monopolist are estimated to be C(Q) = 100 + 20Q + Q2. At the profit-maximizing combination of output and price, deadweight loss is:
A.\$30.
B.\$50.
C.\$80.
D.Cannot be determined with the given information.
answer
50
question
John provides cheese (H) and milk (M) to the market with the following total cost function C(H, M)= 8 + 0.5H2 + 0.1M2. The prices of cheese and milk in the market are \$3 and \$4 respectively. Assume that the cheese and milk markets are perfectly competitive. What output of milk maximizes profits?
A.10
B.20
C.30
D.40
answer
20
question
Suppose that initially the price is \$20 in a perfectly competitive market. Firms are making zero economic profits. Then the market demand shrinks permanently, some firms leave the industry,
and the industry returns to a long-run equilibrium. What will be the new equilibrium price, assuming cost conditions in the industry remain constant?
A.\$20
B.\$16
C.Lower than \$20 but exact value cannot be known without more information.
D.Larger than \$20 but exact value cannot be known without more information.
answer
20
question
A monopoly has two production plants with cost functions C1= 40 + 0.2 Q12 and C2= 50 + 0.1 Q22. The demand it faces is Q = 480 - 5P. What is the profit-maximizing level of output?
A.Q1 = 50; Q2 = 100
B.Q1 = 60; Q2= 120
C.Q1= Q2= 75
D.Q1 = Q2 = 100
answer
Q1 = 60; Q2= 120
question
A monopoly has two production plants with cost functions C
1= 40 + 0.2Q12and C2= 50 + 0.1Q22. The demand it faces is Q = 480 - 5P. What is the profit-maximizing price?
A.\$40 per unit
B.\$45 per unit
C.\$50 per unit
D.\$60 per unit
answer
60 per unit
question
You are the manager of a monopoly that faces a demand curve described by P = 80 - 5Q. Your costs are C = 10 + 5Q. The revenue-maximizing output is:
A.2.5.
B.5.
C.8.
D.None of the answers is correct.
answer
8
question
You are the manager of a monopoly that faces a demand curve described by P = 10 - 2Q. Your costs are C = 20 + 2Q. The revenue-maximizing output is:
A.1.5.
B.3.
C.4.
D.None of the answers is correct.
answer
None of the answers is correct.
1 of 123
question
You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 78 - 15Q, where Q = Q1+ Q2 The marginal costs associated with producing in thetwo plants are MC1= 3Q1and MC2 = 2Q2How much output should be produced in plant 1 inorder to maximize profits?
A. 1
B. 2
C. 3
D. 4
answer
1
question
You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 78 - 15Q, where Q = Q1+ Q2. The marginal costs associated with producing in the two plants are MC 1= 3Q1and MC2= 2Q2 What price should be charged to maximize profits?
A.\$20.5
B.\$40.5
C.\$60.5
D.\$80.5
answer
40.5
question
You are the manager of a firm that produces output in two plants. The demand for your firm's
product is P = 78 - 15Q, where Q = Q
1+ Q2 The marginal costs associated with producing in the two plants are MC1= 3Q1and MC2= 2Q2What price should be charged in order to maximize
revenues?
A.\$39
B.\$47
C.\$52
D.\$56
answer
39
question
Which of the following is true under monopoly?
A.Profits are always positive.
B.P > MC.
C.P = MR.
D.All of the choices are true for monopoly.
answer
P > MC.
question
You are the manager of a firm that sells its product in a competitive market at a price of \$50. Your firm's cost function is C = 40 + 5Q2. The profit-maximizing output for your firm is:
A.4/5.
B.10.
C.5.
D.45.
answer
5
question
You are the manager of a firm that sells its product in a competitive market at a price of \$50. Your firm's cost function is C = 40 + 5Q2 Your firm's maximum profits are:
A.125.
B.250.
C.100.
D.85.
answer
85
question
You are the manager of a monopoly that faces a demand curve described by P = 230 - 20Q. Your costs are C = 5 + 30Q. The profit-maximizing output for your firm is:
A.4.
B.5.
C.6.
D.7.
answer
5
question
You are the manager of a monopoly that faces a demand curve described by P = 230 - 20Q. Your costs are C = 5 + 30Q. The profit-maximizing price is:
A.150.
B.90.
C.130.
D.110.
answer
130
question
You are the manager of a monopoly that faces a demand curve described by P = 230 - 20Q. Your costs are C = 5 + 30Q. Your firm's maximum profits are:
A.495.
B.475.
C.480.
D.415.
answer
495
question
You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 120 - 6Q, where Q = Q1+ Q2. The marginal costs associated with producing in the two plants are MC
1= 2Q1 and MC2= 4Q2. How much output should be produced in plant 1 in order to maximize profits?
A.3
B.6
C.9
D.12
answer
6
question
You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 120 - 6Q, where Q = Q
1+ Q2 The marginal costs associated with producing in the two plants are MC1 = 2Q1 and MC2 = 4Q. What price should be charged to maximize profits?
A.60
B.66
C.70
D.76
answer
66
question
You are the manager of a firm that produces output in two plants. The demand for your firms product is P = 120 - 6Q, where Q = Q1 + Q2. The marginal costs associated with producing in the two plants are MC1 = 2Q1 and MC2= 4Q2 What price should be charged in order to maximize revenues?
A.6
B.2
C.24
D.60
answer
60
question
In a competitive industry with identical firms, long-run equilibrium is characterized by:
A.P = AC.
B.P = MC.
C.MR = MC.
D.All of the statements associated with this question are correct.
answer
All of the statements associated with this question are correct.
question
Which of the following is true?
A. A monopolist produces on the inelastic portion of its demand.
B. A monopolist always earns an economic profit.
C.The more inelastic the demand, the closer marginal revenue is to price.
D. In the short run, a monopoly will shut down if P < AVC.
answer
In the short run, a monopoly will shut down if P < AVC.
question
You are the manager of a firm that sells its product in a competitive market at a price of \$40. Your firm's cost function is C = 60 + 4Q2 The profit-maximizing output for your firm is:
A.4.
B.5.
C.10.
D.15.
answer
5
question
You are the manager of a firm that sells its product in a competitive market at a price of \$40. Your firm's cost function is C = 60 + 4Q2 Your firm's maximum profits are:
A.36.
B.60.
C.40.
D.80.
answer
40
question
You are the manager of a monopoly that faces a demand curve described by P = 85 - 5Q. Your costs are C = 20 + 5Q. The profit-maximizing output for your firm is:
A.6.
B.5.
C.7.
D.8.
answer
8
question
You are the manager of a monopoly that faces a demand curve described by P = 85 - 5Q. Your costs are C = 20 + 5Q. The profit-maximizing price is:
A.45.
B.55.
C.60.
D.50.
answer
45
question
You are the manager of a monopoly that faces a demand curve described by P = 85 - 5Q. Your costs are C = 20 + 5Q. The revenue-maximizing output is:
A.85.
B.9.
C.10.
D.None of the answers is correct.
answer
None of the answers is correct.
question
You are the manager of a firm that sells its product in a competitive market at a price of \$60. Your firm's cost function is C = 50 + 3Q2 The profit-maximizing output for your firm is:
A.10.
B.20.
C.30.
D.40.
answer
10
question
You are the manager of a firm that sells its product in a competitive market at a price of \$60. Your firm's cost function is C = 50 + 3Q2 Your firm's maximum profits are:
A.250.
B.400.
C.450.
D.500.
answer
250
question
You are the manager of a monopoly that faces a demand curve described by P = 63 - 5Q. Your costs are C = 10 + 3Q. The profit-maximizing output for your firm is:
A.3.
B.4.
C.5.
D.6.
answer
6
question
You are the manager of a monopoly that faces a demand curve described by P = 63 - 5Q. Your costs are C = 10 + 3Q. The profit-maximizing price is:
A.20.
B.27.
C.33.
D.55.
answer
33
question
You are the manager of a monopoly that faces a demand curve described by P = 63 - 5Q. Your costs are C = 10 + 3Q. Your firm's maximum profits are:
A.0.
B.66.
C.120.
D.170.
answer
170
question
You are the manager of a monopoly that faces a demand curve described by P = 63 - 5Q. Your costs are C = 10 + 3Q. The revenue-maximizing output is:
A.10/63.
B.5.
C.6.3.
D.None of the answers is correct.
answer
6.3
question
Which of the following is true under monopoly?
A.Profits are always positive.
B.P > minimum of ATC.
C.P = MR.
D.None of the answers is correct.
answer
None of the answers is correct.
question
In the long run, monopolistically competitive firms:
A. charge prices equal to marginal cost.
B. have excess capacity.
C. produce at the minimum of average total cost.
D. have excess capacity and produce at the minimum of average total cost.
answer
have excess capacity.
question
If a monopolistically competitive firm's marginal cost increases, then in order to maximize profits,
the firm will:
A.reduce output and increase price.
B.increase output and decrease price.
C.increase both output and price.
D.reduce both output and price.
answer
reduce output and increase price.
question
Which of the following market structures would you expect to yield the greatest product variety?
A.Monopoly
B.Monopolistic competition
C.Bertrand oligopoly
D.Perfect competition
answer
Monopolistic competition
question
The primary difference between monopolistic competition and perfect competition is:
A.the ease of entry and exit into the industry.
B.the number of firms in the market.
C.Both the ease of entry and exit into the industry and the number of firms in the market are correct.
D. None of the answers is correct.
answer
None of the answers is correct.
question
Which of the following industries is best characterized as monopolistically competitive?
A.Toothpaste
B.Crude oil
C.Agriculture
D.Local telephone service
answer
Toothpaste
question
Which of the following is an example of monopoly?
A.Shoe industry in the United States
B.Local utility industry in a small town
C.Newspaper industry in New York City
D.Bread industry in New York City
answer
Local utility industry in a small town
question
Differentiated goods are a feature of a:
A.perfectly competitive market.
B.monopolistically competitive market.
C.monopolistic market.
D.monopolistically competitive market and monopolistic market.
answer
monopolistically competitive market.
question
Firms have market power in:
A.perfectly competitive markets.
B.monopolistically competitive markets.
C.monopolistic markets.
D.monopolistically competitive markets and monopolistic markets.
answer
monopolistically competitive markets and monopolistic markets.
question
There is no market supply curve in:
A. a perfectly competitive market.
B. a monopolistically competitive market.
C. a monopolistic market.
D. monopolistically competitive and monopolistic markets.
answer
monopolistically competitive and monopolistic markets.
question
Suppose that initially the price is \$50 in a perfectly competitive market. Firms are making zero economic profits. Then the market demand shrinks permanently, some firms leave the industry,
and the industry returns to a long-run equilibrium. What will be the new equilibrium price, assuming cost conditions in the industry remain constant?
A. \$50
B. \$45
C. Lower than \$50, but exact value cannot be known without more information.
D. Larger than \$45, but exact value cannot be known without more information.
answer
50
question
Which of the following statements concerning monopoly is NOT true?
A. A market may be monopolistic because there are some legal barriers.
B. A monopoly has market power.
C. A monopoly is always undesirable.
D. There is some deadweight loss in a monopolistic market.
answer
A monopoly is always undesirable.
question
Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets?
A. Firms produce homogeneous goods.
B. There is free entry.
C. Long-run profits are zero.
D. There is free entry and long-run profits are zero.
answer
There is free entry and long-run profits are zero.
question
The source(s) of monopoly power for a monopoly may be:
A. economies of scale.
B. economies of scope.
C. patents.
D. All of the statements associated with this question are correct.
answer
All of the statements associated with this question are correct.
question
Economies of scale exist whenever:
A. average total costs decline as output increases.
B. average total costs increase as output increases.
C. average total costs are stationary as output increases.
D. average total costs increase as output increases and average total costs are stationary as output increases.
answer
average total costs decline as output increases.
question
The number of efficient plants compatible with domestic consumption of the refrigerator industry in
Sweden is 0.7. Which of the following implications is(are) correct?
A. In the absence of imports, the refrigerator industry in Sweden is monopolistic.
B. The refrigerator industry in Sweden is perfectly competitive.
C. The refrigerator industry in Sweden is monopolistically competitive.
D. None of the answers is correct.
answer
In the absence of imports, the refrigerator industry in Sweden is monopolistic.
question
A monopoly has two production plants with cost functions C
1 = 50 + 0.1Q12 and C2 = 30 + 0.05Q22. The demand it faces is Q = 500 - 10P. What is the condition for profit maximization?
A. MC1(Q1) = MC2(Q2) = P(Q1 + Q2).
B. MC1(Q1) = MC2(Q2) = MR(Q1 + Q2).
C. MC1(Q1 + Q2) = MC2(Q1 + Q2) = P (Q1 + Q2).
D. MC1(Q1 + Q2) = MC2(Q1 + Q2) = MR (Q1 + Q2).
answer
MC1(Q1) = MC2(Q2) = MR(Q1 + Q2).
question
A monopoly has two production plants with cost functions C
1= 50 + 0.1Q12and C2= 30 + 0.05Q22. The demand it faces is Q = 500 - 10P. What is the profit-maximizing level of output?
A.Q1 = 62.5; Q2 = 125.
B.Q1 = 125; Q2 = 62.5.
C.Q1 = Q2 = 125.
D.Q1 = Q2 = 62.5.
answer
Q1 = 62.5; Q2 = 125.
question
A monopoly has two production plants with cost functions C1= 50 + 0.1Q12 and C2= 30 + 0.05Q22. The demand it faces is Q = 500 - 10P. What is the profit-maximizing price?
A. \$12.5 per unit
B. \$6.25 per unit
C. \$31.25 per unit
D. \$18.75 per unit
answer
31.25 per unit
question
Which of the following is a correct representation of the profit maximization condition for a
monopoly?
A. P = MR
B. MC = MR
C. P = ATC + MR
D. MR = MC + ATC
answer
MC = MR
question
Let the demand function for a product be Q = 100 - 2P. The inverse demand function of this
demand function is:
A. Q = 100 + 2P.
B. P = 50 - 0.5Q.
C. P = 50 + 0.5Q.
D. None of the answers is correct.
answer
P = 50 - 0.5Q.
question
A linear demand function exhibits:
A. constant demand elasticity.
B. more elastic demand as output increases.
C. less elastic demand as output increases.
D. insufficient information to determine.
answer
less elastic demand as output increases.
question
Which of the following is NOT a basic feature of a monopolistically competitive industry?
A. There are many buyers and sellers in the industry.
B. Each firm in the industry produces a differentiated product.
C. There is free entry and exit into the industry.
D. Each firm owns a patent on its product.
answer
Each firm owns a patent on its product.
question
In the long run, monopolistically competitive firms produce a level of output such that:
A. P > MC.
B. P = ATC.
C. ATC > minimum of average costs.
D. All of the statements associated with this question are correct.
answer
All of the statements associated with this question are correct.
question
Chris raises cows and produces cheese and milk because he enjoys:
A. economies of scale.
B. economies of scope.
C. cost complementarity.
D. None of the answers is correct.
answer
economies of scope.
question
What contributes to the existence of multiproduct firms?
A. Economies of scale
B. Economies of scope
C. Cost complementarity
D. Economies of scope and cost complementarity
answer
Economies of scope and cost complementarity
question
Which of the following is(are) basic feature(s) of a perfectly competitive industry?
A. Buyers and sellers have perfect information.
B. There are no transaction costs.
C. There is free entry and exit in the market.
D. All of the statements associated with this question are correct.
answer
All of the statements associated with this question are correct.
question
In the long run, perfectly competitive firms produce a level of output such that:
A. P = MC.
B. P = minimum of AC.
C. P = MC and P = minimum of AC.
D. None of the answers is correct.
answer
P = MC and P = minimum of AC.
question
A monopoly has produced a product with a patent for the last few years. The patent is going to expire. What will likely happen to the demand for the patent-holder's product when the patent runs
out?
A. Demand will increase.
B. Demand will decline.
C. Nothing.
D. None of the answers is correct.
answer
Demand will decline.
question
A monopoly has produced a product with a patent for the last few years. The patent is going to
expire. What will happen after the patent expires?
A. The incumbent will leave the market.
B. The incumbent will retain its status as a monopoly but produce at a lower price.
C. Some firms will enter the industry.
D. None of the answers is correct.
answer
Some firms will enter the industry.
question
You are a manager in a perfectly competitive market. The price is \$14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q2 What level of output should you produce in the short run?
A.5
B.8
C.10
D.15
answer
10
question
You are a manager in a perfectly competitive market. The price in your market is \$14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q 2 What price should you charge in the short run?
A. \$12
B. \$14
C. \$16
D. \$18
answer
14
question
You are a manager in a perfectly competitive market. The price in your market is \$14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q 2 What level of profits will you make in the short run?
A.\$20
B.\$40
C.\$60
D.\$80
answer
40
question
You are a manager in a perfectly competitive market. The price in your market is \$14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q2 What will happen in the long run if there is no change in the
demand curve?
A. Some firms will leave the market eventually.
B. Some firms will enter the market eventually.
C.There will be neither entry nor exit from the market.
D.None of the answers is correct.
answer
Some firms will enter the market eventually.
question
A perfectly competitive firm faces a:
A. perfectly elastic demand function.
B.perfectly inelastic demand function.
C.demand function with unitary elasticity.
D. None of the answers is correct.
answer
perfectly elastic demand function.
question
A firm has a total cost function of C(Q) = 50 + 10Q1/2. The firm experiences:
A.economies of scale.
B.constant returns to scale.
C.diseconomies of scale.
D.All of the statements associated with this question are correct, depending on the quantity.
answer
economies of scale.
question
A firm can produce two products with the cost function C(Q1, Q2) = 10 + 5Q+5Q2 - 0.2Q1Q2 The firm enjoys:
A.economies of scale in the two products separately.
B.economies of scope.
C.cost complementarity.
D.economies of scale in the two products separately and cost complementarity.
answer
cost complementarity.
question
"Monopolistic competition is literally a kind of competition. Hence, there is no deadweight loss in a monopolistically competitive market."
A.The statement is by definition correct but empirically incorrect.
B. The statement is correct.
C. The statement is incorrect.
D. None of the answers is correct.
answer
The statement is incorrect.
question
Eric provides cheese (H) and milk (M) to the market with the following total cost function: C(H, M)= 10 + 0.4H2+ 0.2M2. The prices of cheese and milk in the market are \$2 and \$5 respectively. Assume that the cheese and milk markets are perfectly competitive. What output of cheese maximizes profits?
A.2
B.2.5
C.5
D.10
answer
2.5
question
Eric provides cheese (H) and milk (M) to the market with the following total cost function: C(H, M)= 10 + 0.4H2 + 0.2M2. The prices of cheese and milk in the market are \$2 and \$5 respectively. Assume that the cheese and milk markets are perfectly competitive. What output of milk maximizes profits?
A.1.25
B.12.5
C.15
D.20
answer
12.5
question
You are a manager for a monopolistically competitive firm. From experience, the profit-maximizing level of output of your firm is 100 units. However, it is expected that prices of other close substitutes will fall in the near future. How should you adjust your level of production in response to this change?
A. Produce more than 100 units.
B. Produce less than 100 units.
C. Produce 100 units.
D. Insufficient information to decide.
answer
Produce less than 100 units
question
Which of the following statements is NOT correct about monopoly?
A. A monopolist generally faces a downward-sloping demand curve.
B. Monopolists always make positive profits in the long run.
C. A monopoly may make negative profits in the short run.
D. There is no close substitute for a monopoly's product.
answer
Monopolists always make positive profits in the long run.
question
You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 20 - Q, where Q = Q1 + Q2. The marginal costs associated with producing in the two plants are MC1 = 2 and MC = 2Q2 How much output should be produced in plant 1 in order to maximize profits?
A.1
B.4
C.8
D.11
answer
8
question
You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 20 - Q, where Q = Q1 + Q2. The marginal costs associated with producing in the two plants are MC1 = 2 and MC2 = 2Q2 What is the profit-maximizing price that the firm should charge?
A.\$8
B.\$9
C.\$11
D.\$12
answer
11
question
Which of the following is true under monopoly?
A.P > ATC
B.P > MC
C.P = MR
D.P = ATC
answer
P > MC
question
You are the manager of a firm that sells its product in a competitive market at a price of \$60. Your
firm's cost function is C = 33 + 3Q 2 The profit-maximizing output for your firm is:
A.3.
B.5.
C.6.
D.10.
answer
10
question
You are the manager of a monopoly that faces an inverse demand curve described by P = 200 -15Q. Your costs are C = 15 + 20Q. The profit-maximizing price is:
A.\$20.
B.\$110.
C.\$135.
D.\$290.
answer
110
question
Which of the following industries is best characterized as monopolistically competitive?
A.Cereal
B.Crude oil
C.Wheat
D.Local electricity service
answer
Cereal
question
Differentiated goods are NOT a feature of a:
A.perfectly competitive market.
B.monopolistically competitive market.
C.monopolistic market.
D.perfectly competitive market and monopolistic market.
answer
perfectly competitive market and monopolistic market.
question
One of the sources of monopoly power for a monopoly may be:
A.diseconomies of scale.
B.differentiated products.
C.patents.
D.free entry and exit.
answer
patents.
question
Let the demand function for a product be Q = 50 - 5P. The inverse demand function of this demand function is:
A.Q = 25 + P
B.P = 10 - 0.2Q
C.P = 10 + 0.2Q
D. P = 50 - 0.2Q
answer
P = 10 - 0.2Q
question
A firm has a total cost function of C(Q) = 75 + 25Q1/2. The firm experiences:
A.economies of scale.
B.diseconomies of scale.
C.constant returns to scale.
D.All of the statements associated with this question are correct.
answer
economies of scale.
question
In a competitive industry with identical firms, long-run equilibrium is characterized by:
A.P > AC.
B.P < MC.
C.MR = MC.
D.MR < P.
answer
MR = MC.
question
You are the manager of a firm that sells its product in a competitive market at a price of \$48. Your firm's cost function is C = 60 + 2Q 2 Your firm's maximum profits are:
A.\$192.
B.\$228.
C.\$348.
D.\$576.
answer
228
question
n the long run, monopolistically competitive firms charge prices:
A. equal to marginal cost.
B.below marginal cost.
C.equal to the minimum of average total cost.
D.above the minimum of average total cost.
answer
above the minimum of average total cost.
question
There is a market supply curve in a:
A.perfectly competitive market.
B.monopolistically competitive market.
C.monopolistic market.
D.perfectly competitive market and monopolistically competitive market.
answer
perfectly competitive market.
question
Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets?
A.Firms produce homogeneous goods.
B.Prices are equal to marginal costs in the long run.
C.Long-run profits are zero.
D.Prices are above marginal costs in the long run.
answer
Long-run profits are zero.
question
Consider a monopoly where the inverse demand for its product is given by P = 200 - 5Q. Based on this information, the marginal revenue function is:
A.MR(Q) = 400 - 2.5Q.
B.MR(Q) = 400 - 10Q.
C.MR(Q) = 200 - 10Q.
D.MR(Q) = 200 - 2.5Q.
answer
MR(Q) = 200 - 10Q.
question
Consider a monopoly where the inverse demand for its product is given by P = 50 - 2Q. Total costs for this monopolist are estimated to be C(Q) = 100 + 2Q + Q2At the profit-maximizing combination of output and price, deadweight loss is:
A.\$32.
B.\$64.
C.\$128.
D.cannot be determined with the given information.
answer
32
question
Consider a monopoly where the inverse demand for its product is given by P = 50 - 2Q. Total costs for this monopolist are estimated to be C(Q) = 100 + 2Q + Q2 At the profit-maximizing combination of output and price, consumer surplus is:
A.\$32.
B.\$64.
C.\$128.
D.cannot be determined with the given information.
answer
64
question
Consider a monopoly where the inverse demand for its product is given by P = 50 - 2Q. Total costs for this monopolist are estimated to be C(Q) = 100 + 2Q + Q2 At the profit-maximizing combination of output and price, monopoly profit is:
A.\$32.
B.\$64.
C.\$92.
D.\$128.
answer
92
question
Suppose perfectly competitive market conditions are characterized by the following inverse demand and inverse supply functions: P = 100 - 5Q and P = 10 + 5Q. The demand curve facing an individual firm operating in this market is:
A.P = 100 - 5Q.
B.a horizontal line at \$9.
C.a horizontal line at \$55.
D.P/N = (100 - 5Q)/N, where N is the total number of firms in the competitive market.
answer
a horizontal line at \$55.
question
Which of the following is true about where a profit-maximizing monopoly will produce on a linear demand curve when it has positive marginal costs?
A.It will produce output on the inelastic portion of the demand curve.
B.It will produce output where MR < 0.
C.It will produce output where MR = 0.
D.It will produce output on the elastic portion of the demand curve.
answer
It will produce output on the elastic portion of the demand curve.
question
Suppose a monopolist knows the own price elasticity of demand for its product is -3 and that its marginal cost of production is constant MC(Q) = 10. To maximize its profit, the monopoly price is:
A.\$1.50 per unit.
B.\$6.67 per unit.
C.\$10 per unit.
D.\$15 per unit.
answer
15 per unit
question
Compute the marginal revenue when the price elasticity of demand is -0.25.
A.-3P, meaning marginal revenue is negative and 3 times greater than price.
B.3P, meaning marginal revenue is positive and 3 times greater than price.
C.-0.33P, meaning that marginal revenue is negative and one-third of the price.
D.-0.25P, meaning that marginal revenue is negative and one-fourth of the price.
answer
-3P, meaning marginal revenue is negative and 3 times greater than price.
question
Suppose that a monopolistically competitive market is at the long-run equilibrium. Based on this information, which of the following conclusions is NOT true?
A.P > MC.
B.Deadweight loss is zero.
C.P = ATC > minimum of ATC.
D. Firms' profits are zero.
answer
Deadweight loss is zero.
question
The first-order conditions for a monopoly to maximize profits are:
A.dR(Q)/dQ = dC(Q)/dQ.
B.MR(Q) = MC(Q).
C.dπ(Q)/dQ = 0.
D.All of the statements associated with this question are correct.
answer
All of the statements associated with this question are correct.
question
Consider firms operating in an industry where the own price elasticity of demand is infinite; that is, Eqp=-infinity. Use this information to determine the type of industry in which these firms operate and the optimal advertising-to-sales ratio.
A.Perfectly competitive industry and 0
B.Monopolistically competitive industry and infinity
C.Perfectly competitive industry and infinity
D. Monopolistic industry and 0
answer
A.Perfectly competitive industry and 0
question
SeaSide Industries currently spends 5 percent of its sales on advertising. Suppose that the elasticity of advertising for Seaside is 0.2. Determine the optimal profit margin over price (P -MC)/P.
A.4 percent
B.10 percent
C.25 percent
D.None of the answers is correct.
answer
25 percent
question
Which of the following is a strategy(ies) used by firms in monopolistically competitive industries to convince consumers that their product is better than their rivals' products?
A. Comparative advertising
B. Niche marketing
C.Equity marketing
D.Comparative advertising or niche marketing
answer
Comparative advertising or niche marketing
question
Which of the following conditions must hold to ensure that profits are, in fact, at a maximum?
A.d(MC(Q))/dQ > 0
B.d(MC(Q))/dQ < 0
C.d2π(Q)/dQ2 < 0
D.d(MC(Q))/dQ > 0 and d2π(Q)/dQ2< 0
answer
d(MC(Q))/dQ > 0 and d2π(Q)/dQ2< 0
question
The second-order condition for a firm maximizing its profit operating in a monopolistically competitive market is:
A.-(d2C(Q)/dQ2) < 0.
B. (d2R (Q)/dQ2) - (d2C(Q)/dQ2) < 0.
C.(d2R (Q)/dQ2) = (d2C(Q)/dQ2).
D. (dMR/dQ) > (dMC/dQ).
answer
(d2R (Q)/dQ2) - (d2C(Q)/dQ2) < 0.
question
The first-order condition for a firm maximizing its profit operating in a monopolistically competitive market is:
A.(dMR/dQ) = (dMC/dQ).
B.P - (dC(Q)/dQ) = 0.
C.(dR(Q)/dQ) - (dC(Q)/dQ) = 0.
D.(dMR/dQ) < (dMC/dQ).
answer
(dR(Q)/dQ) - (dC(Q)/dQ) = 0.
question
The second-order condition for a monopoly maximizing its profit is:
A.(d2R(Q)/dQ2) - (d2C(Q)/dQ2) < 0.
B.(d2R(Q)/dQ2) - (d2C(Q)/dQ2) = 0.
C.(dMR/dQ) < (dMC/dQ).
D.(d2R(Q)/dQ2) - (d2C(Q)/dQ2) < 0 or (dMR/dQ) < (dMC/dQ).
answer
(d2R(Q)/dQ2) - (d2C(Q)/dQ2) < 0 or (dMR/dQ) < (dMC/dQ).
question
The first-order condition for a monopoly maximizing its profit is:
A.P - (dC(Q)/dQ) = 0.
B.(dR(Q)/dQ) - (dC(Q)/dQ) = 0.
C.(dR(Q)/dQ) - (dC(Q)/dQ) < 0.
D.(d2R(Q)/dQ2) - (d2C(Q)/dQ2) < 0.
answer
(dR(Q)/dQ) - (dC(Q)/dQ) = 0.
question
The second-order condition for a firm maximizing its profits operating in a perfectly competitive market is:
A.(d2π/dQ2) < 0.
B.- (d2C(Q)/dQ2) < 0.
C.- (dMC/dQ) < 0.
D.All of the statements associated with this question are correct.
answer
All of the statements associated with this question are correct.
question
The first-order conditions for profit maximization in a perfectly competitive market are:
A. P - (dC(Q)/dQ) = 0.
B. (dR(Q)/dQ) - (d2C(Q)/dQ2) < 0.
C.P - (d2C(Q)/dQ2) = 0.
D. P > (dC(Q)/dQ).
answer
P - (dC(Q)/dQ) = 0.
question
You are the manager of a firm that sells its product in a competitive market with market (inverse) demand given by P = 50 - 0.5Q. The market equilibrium price is \$50. Your firm's cost function is C= 40 + 5Q 2 Your firm's marginal revenue is:
A.\$50.
B.MR(Q) = 10Q.
C.MR(Q) = 50 - Q.
D.There is insufficient information to determine the firm's marginal revenue.
answer
50
question
You are the manager of a firm that sells its product in a monopolistically competitive market with (inverse) demand given by P = 50 - 0.5Q. Your firm's cost function is C = 40 + 5Q2 Your firm's
marginal revenue is:
A. P = 50 - 0.5Q.
B. P = 50 - Q.
C. P = 100 - Q.
D. There is insufficient information to determine the firm's marginal revenue.
answer
P = 50 - Q.
question
You are the manager of a monopoly firm with (inverse) demand given by P = 50 - 0.5Q. Your firm's cost function is C = 40 + 5Q2. Your firm's marginal revenue is:
A.P = 50 - 0.5Q.
B.P = 100 - Q.
C.P = 50 - Q.
D.There is insufficient information to determine the firm's marginal revenue.
answer
P = 50 - Q.
question
Which of the following formulas correctly measures the profit of a monopoly?
A.π= TR - TC
B.π = (P - ATC)Q
C.π = (P - AVC)Q
D.π= TR - TC andπ = (P - ATC)Q
answer
π= TR - TC andπ = (P - ATC)Q
question
Which of the following is true under monopolistic competition in the short run?
A.Profits are always zero.
B.P > MC.
C.P = MR.
D.All of the choices are true in monopolistic competition.
answer
P > MC.
question
Which of the following is true under monopolistic competition in the long run?
A.Profits are always zero.
B.P > MC.
C.P = MR.
D.All of the choices are true in monopolistic competition.
answer
Profits are always zero.
question
Which of the following is true under perfect competition?
A.Profits are always positive.
B.P > MC.
C.P = MR.
D.All of the choices are true for perfect competition.
answer
P = MR.
question
In a competitive industry with identical firms, long-run equilibrium is characterized by:
A.P > min ATC.
B.P < AVC.
C.MR = MC = min ATC.
D.MR < P.
answer
MR = MC = min ATC.
question
In a monopoly where the marginal revenue and price are, respectively, given by \$10 and \$20, the
price elasticity of demand is:
A.-1.
B.-2.
C.-0.5.
D.Cannot be determined based on the information in the question.
answer
-2
question
In a monopoly where the marginal revenue and price are, respectively, given by \$0.50 and \$2, the price elasticity of demand is:
A.-0.75.
B.-1.
C.-5/4.
D.-4/3.
answer
-4/3
question
You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 96 - 15Q, where Q = Q1 + Q2 The marginal costs associated with producing in the two plants are MC1= 6Q1and MC2= 3Q2. How much output should be produced in plant 2 in order to maximize profits?
A.1
B.2
C.3
D.4
answer
2
question
In a monopoly where the marginal revenue and price are, respectively, given by \$3 and \$6, the price elasticity of demand is:
A.-0.5.
B.-1.
C.-1.5.
D.-2.
answer
-2
question
Clark Industries currently spends 5 percent of its sales on advertising. Suppose that the elasticity of advertising for Clark is 0.25. Determine the optimal profit margin over price (P - MC)/P.
A.15 percent.
B.20 percent.
C.25 percent.
D. None of the answers is correct.
answer
20 percent
question
Compute the marginal revenue when the price elasticity of demand is -0.10.
A.-9P, meaning marginal revenue is negative and 9 times greater than price.
B.9P, meaning marginal revenue is positive and 9 times greater than price.
C.-3P, meaning marginal revenue is negative and 3 times greater than price.
D.3P, meaning marginal revenue is positive and 3 times greater than price.
answer
-9P, meaning marginal revenue is negative and 9 times greater than price.
question
Consider a monopoly where the inverse demand for its product is given by P = 80 - 2Q. Total costs for this monopolist are estimated to be C(Q) = 100 + 20Q + Q2. At the profit-maximizing combination of output and price, deadweight loss is:
A.\$30.
B.\$50.
C.\$80.
D.Cannot be determined with the given information.
answer
50
question
John provides cheese (H) and milk (M) to the market with the following total cost function C(H, M)= 8 + 0.5H2 + 0.1M2. The prices of cheese and milk in the market are \$3 and \$4 respectively. Assume that the cheese and milk markets are perfectly competitive. What output of milk maximizes profits?
A.10
B.20
C.30
D.40
answer
20
question
Suppose that initially the price is \$20 in a perfectly competitive market. Firms are making zero economic profits. Then the market demand shrinks permanently, some firms leave the industry,
and the industry returns to a long-run equilibrium. What will be the new equilibrium price, assuming cost conditions in the industry remain constant?
A.\$20
B.\$16
C.Lower than \$20 but exact value cannot be known without more information.
D.Larger than \$20 but exact value cannot be known without more information.
answer
20
question
A monopoly has two production plants with cost functions C1= 40 + 0.2 Q12 and C2= 50 + 0.1 Q22. The demand it faces is Q = 480 - 5P. What is the profit-maximizing level of output?
A.Q1 = 50; Q2 = 100
B.Q1 = 60; Q2= 120
C.Q1= Q2= 75
D.Q1 = Q2 = 100
answer
Q1 = 60; Q2= 120
question
A monopoly has two production plants with cost functions C
1= 40 + 0.2Q12and C2= 50 + 0.1Q22. The demand it faces is Q = 480 - 5P. What is the profit-maximizing price?
A.\$40 per unit
B.\$45 per unit
C.\$50 per unit
D.\$60 per unit
answer
60 per unit
question
You are the manager of a monopoly that faces a demand curve described by P = 80 - 5Q. Your costs are C = 10 + 5Q. The revenue-maximizing output is:
A.2.5.
B.5.
C.8.
D.None of the answers is correct.
answer
8
question
You are the manager of a monopoly that faces a demand curve described by P = 10 - 2Q. Your costs are C = 20 + 2Q. The revenue-maximizing output is:
A.1.5.
B.3.
C.4.
D.None of the answers is correct.
answer
None of the answers is correct.

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