Characteristics and Graph of Monopoly
Which of the following is necessarily true at a monopolist’s profit-maximizing level of output?
(A)Marginal revenue is equal to marginal cost, but greater than price.
(B)Marginal revenue is equal to marginal cost, but less than price.
(C)Marginal revenue is equal to both marginal cost and price.
(D)Average total cost is minimized.
(E)Average variable cost is minimized.
Assuming a linear downward-sloping demand curve, as a monopoly firm sells additional units of output, its marginal
revenue will
(A)increase at an increasing rate
(B)increase at first, then decrease
(C)decrease at first, then increase
(D)decrease continuously
(E)remain constant
For the firm shown in this graph, the short-run, profit-maximizing strategy would be to set output at
(A)Q1, price at P1, and suffer a loss
(B)Q1, price at P3, and earn an economic profit
(C)Q1, price at P3, and earn only a normal profit
(D)Q2, price at P2, and earn an economic profit
(E)Q2, price at P2, and earn only a normal profit
A monopolist successfully negotiates lower wages for its employees and thus, lowers the marginal cost and average cost
of production. The price of the product and the level of production are most likely to change in which of the following
ways?
(A)Price = Stays the same ; Level of Output = Stays the same
(B)Price = Stays the same ; Level of Output = Goes up
(C)Price = Goes up ; Level of Output = Goes down
(D)Price = Goes down ; Level of Output = Stays the same
(E)Price = Goes down ; Level of Output = Goes up
For the firm shown in this graph, which combination of output and price will maximize its profit?
(A)Output = Q1 ; Price = P4
(B)Output = Q1 ; Price = P1
(C)Output = Q2 ; Price = P3
(D)Output = Q2 ; Price = P2
(E)Output = Q3 ; Price = P2
If Steve Incorporated is a monopolistic producer of diamonds, the firm's demand curve is downward sloping because
(A)the number of diamonds Steve Incorporated offers for sale affects the price of diamonds
(B)marginal revenue is negative throughout the range of the demand curve
(C)marginal revenue is positive throughout the range of the demand curve
(D)the diamond industry consists of a few firms selling similar diamonds
(E)the demand for diamonds is inelastic
If the firm in this graph produces 100 units of output, its economic profits will be
(A)$20,000
(B)$15,000
(C)$10,000
(D)$5,000
(E)0
What will happen if the firm in this graph produces more than 100 units?
(A)Customers would buy more than 100 units at the price of $200 per unit.
(B)To sell more than 100 units, the firm would have to lower its price.
(C)The firm would certainly experience an economic loss.
(D)The firm's average cost of production would go up at first.
(E)The firm's profits would go up.
This graph represents a profit-maximizing firm. What should it do?
(A)Produce at the minimum of the average total cost curve.
(B)Shutdown if conditions do not improve in the long run.
(C)Raise the price in order to maximize profits.
(D)Produce more output in order to maximize profits.
(E)Use less labor and more capital to increase efficiency.
What area represents economic profit for this profit-maximizing monopolist?
(A)VWBA
(B)V0Q5A
(C)VZFA
(D)VYDA
(E)Y0Q8E
Monopoly power comes from
(A)Barriers to entry
(B)Elasticity of supply
(C)Shortages
(D)Absence of profits
(E)Open markets
Marginal revenue for a single-price monopolist can be described as which of the following?
(A)MR = P
(B)MR > P
(C)MR < P
(D)MR < 0 when it maximizes revenues
(E)MR = 0 when it maximizes profit
For the firm whose revenue and cost curves are shown in this graph, which of the following statements is true?
(A)Its profit-maximizing price is $1.
(B)Its maximum profit is $800.
(C)Its profit-maximizing output level is 40 units.
(D)If it produces 50 units, it will earn no economic profits.
(E)At the profit-maximizing level of output, its total cost is $200.