Microeconomics Chapter 10 End of Chapter Questions

question

A profit maximizing monopoly will produce where which of the following is true

answer

Marginal revenue is less than price, marginal revenue is equal to the marginal cost, marginal revenue is positive

question

Imagine two firms with identical cost structures that do not exhibit economies of scale at high levels of production. One is competing in a perfectly competitive market and one is a monopoly. In the long run which of the following is true?

answer

The monopoly will charge a higher price than the perfectly competitive firm

question

If a monopoly faces a demand curve that is downward sloping, the marginal revenue will be which of the following?

answer

Must be less than price

question

An increase in fixed costs for a monopoly will do which of the following?

answer

Fixed costs will not affect production or pricing decisions, but they do increase the overall cost, thus lowering profits

question

A decrease in variable costs will cause the monopoly to do what?

answer

Decrease the price

question

A monopoly produces a level of output where demand is______

answer

Elastic

question

Copyrights on movies, books, and music act as a barrier to entry in order to give people what?

answer

Incentives to create

question

A movie theater price discriminates by charging children and seniors lower prices than adults because their demand is ________

answer

Elastic

question

A monopoly will not necessarily be technically efficient because which of the following is true?

answer

Barriers to entry will keep firms from entering

question

A monopoly will always charge a price that is_______ marginal cost

answer

Greater than

question

The supply curve in a perfectly competitive market is the sum of all of the individual firms marginal cost curve. What is the supply curve for a monopoly?

answer

A monopoly does not have a supply curve

question

When comparing a monopoly and a perfectly competitive market where the costs are the same, the monopoly will produce a_______quanity.

answer

Lower

question

A monopoly producing where marginal revenue equals marginal cost will do which of the following?

answer

It cannot increase quantity and make a greater profit, it is producing at the highest profit possible in their market, it is producing where the additional revenue is just equal to the additional cost for each output

question

Calculate marginal revenue in the following case: Price is $100 and 20 units are sold, then price drops to $99 and 21 units are sold

answer

79.0

(marginal revenue = change in revenue/change in quantity)
Revenue increases from $2,000 ($10020) to $2079 ($9921) and quantity changes by 1. The change in revenue can also be broken down into a decrease in revenue from $20 from reducing the price from $100-$99 for the original 20 units, along with an increase in revenue of $99 from the additional unit sold at that price. together, this means that the change in revenue is $79 ($99-$20) because the revenue gained from selling that additional good is greater than the loss in revenue from reducing the price.

question

Monopoly would never produce where marginal revenue is negative because which of the following is true?

answer

marginal cost is always positive

question

The market demand in a monopoly market differs (or not) from the demand the monopoly itself faces by_____

answer

The monopoly is the only firm in the market, so it does not differ

question

If you monopoly is not producing at the profit maximizing quantity, then it must be the case that which of the following is true?

answer

Marginal cost is greater than marginal revenue, marginal revenue is greater than marginal cost, marginal revenue is negative

question

which situation would be labeled a "natural monopoly"?

answer

A firm has large economies of scale, and is that able to sell the good for a lower price than what is there are many firms

question

If a monopoly increases the quantity above the profit maximization level which of the following will be true?

answer

Marginal revenue will be lower than before, marginal cost will be greater than marginal revenue, price would decrease

question

Monopolies will price discriminate if which of the following is true?

answer

Atthe current price, one group of consumers is elastic while another group is not as responsive (inelastic)

1 of 20

question

A profit maximizing monopoly will produce where which of the following is true

answer

Marginal revenue is less than price, marginal revenue is equal to the marginal cost, marginal revenue is positive

question

answer

The monopoly will charge a higher price than the perfectly competitive firm

question

If a monopoly faces a demand curve that is downward sloping, the marginal revenue will be which of the following?

answer

Must be less than price

question

An increase in fixed costs for a monopoly will do which of the following?

answer

Fixed costs will not affect production or pricing decisions, but they do increase the overall cost, thus lowering profits

question

A decrease in variable costs will cause the monopoly to do what?

answer

Decrease the price

question

A monopoly produces a level of output where demand is______

answer

Elastic

question

Copyrights on movies, books, and music act as a barrier to entry in order to give people what?

answer

Incentives to create

question

A movie theater price discriminates by charging children and seniors lower prices than adults because their demand is ________

answer

Elastic

question

A monopoly will not necessarily be technically efficient because which of the following is true?

answer

Barriers to entry will keep firms from entering

question

A monopoly will always charge a price that is_______ marginal cost

answer

Greater than

question

The supply curve in a perfectly competitive market is the sum of all of the individual firms marginal cost curve. What is the supply curve for a monopoly?

answer

A monopoly does not have a supply curve

question

When comparing a monopoly and a perfectly competitive market where the costs are the same, the monopoly will produce a_______quanity.

answer

Lower

question

A monopoly producing where marginal revenue equals marginal cost will do which of the following?

answer

question

Calculate marginal revenue in the following case: Price is $100 and 20 units are sold, then price drops to $99 and 21 units are sold

answer

question

Monopoly would never produce where marginal revenue is negative because which of the following is true?

answer

marginal cost is always positive

question

The market demand in a monopoly market differs (or not) from the demand the monopoly itself faces by_____

answer

The monopoly is the only firm in the market, so it does not differ

question

If you monopoly is not producing at the profit maximizing quantity, then it must be the case that which of the following is true?

answer

Marginal cost is greater than marginal revenue, marginal revenue is greater than marginal cost, marginal revenue is negative

question

which situation would be labeled a "natural monopoly"?

answer

A firm has large economies of scale, and is that able to sell the good for a lower price than what is there are many firms

question

If a monopoly increases the quantity above the profit maximization level which of the following will be true?

answer

Marginal revenue will be lower than before, marginal cost will be greater than marginal revenue, price would decrease

question

Monopolies will price discriminate if which of the following is true?

answer

Atthe current price, one group of consumers is elastic while another group is not as responsive (inelastic)

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Microeconomics Chapter 10 End of Chapter Questions

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