Econ 10.1

43) Refer to Scenario 10.6. If red rubber balls can be produced at any of the three plants, what is the marginal cost of 5th red rubber ball? A) 4 B) 5 C) 8 D) 20

A

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 - 2P MR = 100 - Q TC = 5Q MC = 5 Refer to Scenario 10.2. How much profit does the monopolist earn? A) $4512.50 B) $4987.50 C) $475.00 D) $5.00

A

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 - 2P MR = 100 - Q TC = 5Q MC = 5 Refer to Scenario 10.2. Suppose that a tax of $5 for each unit produced is imposed by state government. How much profit does the monopolist earn? A) $4050 B) $4950 C) $450 D) $5

A

A monopolist has determined that at the current level of output the price elasticity of demand is -0.15. Which of the following statements is true? A) The firm should cut output. B) This is typical for a monopolist; output should not be altered. C) The firm should increase output. D) None of the above is necessarily correct.

A

After the imposition of a tax of $2 per unit of output, what is the profit maximizing price? A) 11 B) 21 C) 31 D) 41 E) none of the above

A

For the monopolist shown below, the profit maximizing level of output is: A) Q1. B) Q2. C) Q3. D) Q4. E) Q5.

A

Suppose your firm develops a new pharmaceutical product that may be used to reduce blood cholesterol levels, so the firm is the monopoly seller of this drug. If the elasticity of demand for this new product is -4, what markup should your firm use to set the profit-maximizing price for the product? A) The price-cost markup is 25% of the price B) The price-cost markup is 25% of the marginal cost C) The price-cost markup is 4% of the marginal cost D) The price-cost markup is 4% of the price

A

The demand curve and marginal revenue curve for red rubber balls are given as follows: Q = 16 - P MR = 16 - 2Q What is the profit maximizing price? A) 10 B) 20 C) 3 D) 40 E) none of the above

A

The monopolist has no supply curve because A) the quantity supplied at any particular price depends on the monopolist's demand curve. B) the monopolist's marginal cost curve changes considerably over time. C) the relationship between price and quantity depends on both marginal cost and average cost. D) there is a single seller in the market. E) although there is only a single seller at the current price, it is impossible to know how many sellers would be in the market at higher prices.

A

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 - 2P MR = 100 - Q TC = 5Q MC = 5 Refer to Scenario 10.2. Suppose that a tax of $5 for each unit produced is imposed by state government. What is the profit maximizing level of output? A) 0 B) 90 C) 95 D) 100 E) none of the above

B

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 - 2P MR = 100 - Q TC = 5Q MC = 5 Refer to Scenario 10.2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What happens to profit? A) It increases by $1000. B) It decreases by $1000. C) It decreases by less than $1000. D) It stays the same.

B

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 - 2P MR = 100 - Q TC = 5Q MC = 5 Refer to Scenario 10.2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What is the profit maximizing level of output? A) 0 B) 90 C) 95 D) 100 E) none of the above

B

A monopolist has equated marginal revenue to zero. The firm has: A) maximized profit. B) maximized revenue. C) minimized cost. D) minimized profit.

B

Assume that a profit maximizing monopolist is producing a quantity such that marginal revenue exceeds marginal cost. We can conclude that the A) firm is maximizing profit. B) firm's output is smaller than the profit maximizing quantity. C) firm's output is larger than the profit maximizing quantity. D) firm's output does not maximize profit, but we cannot conclude whether the output is too large or too small.

B

Barbara is a producer in a monopoly industry. Her demand curve, total revenue curve, marginal revenue curve and total cost curve are given as follows: Q = 160 - 4P TR = 40Q - 0.25Q2 MR = 40 - 0.5Q TC = 4Q MC = 4 Refer to Scenario 10.1. The price of her product will be ________. A) 4 B) 22 C) 32 D) 42 E) 72

B

If a monopolist sets her output such that marginal revenue, marginal cost and average total cost are equal, economic profit must be: A) negative. B) positive. C) zero. D) indeterminate from the given information

B

Refer to Scenario 10.5. From the perspective of the firm, what is the marginal cost of the 5th garden hose? A) 4 B) 5 C) 16 D) 12 E) 8

B

Scenario 10.3: The demand curve and marginal revenue curve for red herrings are given as follows: Q = 250 - 5P MR = 50 - 0.4Q Refer to Scenario 10.3. Compared to a competitive red herring industry, the monopolistic red herring industry A) produces more output at a higher price. B) produces less output at a higher price. C) produces more output at a lower price. D) produces less output at a lower price. E) not enough information to relate the monopolistic red herring industry to a competitive industry.

B

Scenario 10.3: The demand curve and marginal revenue curve for red herrings are given as follows: Q = 250 - 5P MR = 50 - 0.4Q Refer to Scenario 10.3. Suppose that a tax of $5 per unit of output is imposed on red herring producers. The price of red herring will A) not change. B) increase by less than $5. C) increase by $5. D) increase by more than $5. E) decrease.

B

The demand for tickets to the Katy Perry concert (Q) is given as follows: Q = 120,000 - 2,000P The marginal revenue is given as: MR = 60 - .001Q The stadium at which the concert is planned holds 60,000 people. The marginal cost of each additional concert goer is essentially zero up to 60,000 fans, but becomes infinite beyond that point. Refer to Scenario 10.4. Suppose that the municipal stadium authority imposes a tax of $10 per ticket on the concert promoters. Given the information above, the profit maximizing ticket price would A) increase by $10. B) increase by $5. C) not change. D) decrease by $5. E) decrease by $10.

B

The marginal revenue of green ink pads is given as follows: MR = 2500 - 5Q The marginal cost of green ink pads is 5Q. A multiplant firm has equated marginal costs at each plant. By doing this A) profits are maximized. B) costs are minimized given the level of output. C) revenues are maximized given the level of output. D) none of the above

B

The marginal revenue of green ink pads is given as follows: MR = 2500 - 5Q The marginal cost of green ink pads is 5Q. Refer to Scenario 10.7. How many ink pads will be produced to maximize profit? A) 50 B) 250 C) 500 D) 800

B

Use the following two statements to answer this question: I. For a monopolist, at every output level, average revenue is equal to price. II. For a monopolist, at every output level, marginal revenue is equal to price. A) Both I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) Both I and II are false. E) Statements I and II could either be true or false depending upon demand.

B

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 - 2P MR = 100 - Q TC = 5Q MC = 5 A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 - 2P MR = 100 - Q TC = 5Q MC = 5 Refer to Scenario 10.2. What is the profit maximizing price? A) $95.00 B) $5.00 C) $52.50 D) $10.00

C

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 - 2P MR = 100 - Q TC = 5Q MC = 5 Refer to Scenario 10.2. Suppose that a tax of $5 for each unit produced is imposed by state government. What is the profit maximizing price? A) $90.00 B) $10.00 C) $55.00 D) $52.50

C

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 - 2P MR = 100 - Q TC = 5Q MC = 5 Refer to Scenario 10.2. What is the profit maximizing level of output? A) 0 B) 90 C) 95 D) 100 E) none of the above

C

A monopolist has set her level of output to maximize profit. The firm's marginal revenue is $20, and the price elasticity of demand is -2.0. The firm's profit maximizing price is approximately: A) $0 B) $20 C) $40 D) $10 E) This problem cannot be answered without knowing the marginal cost.

C

A multiplant monopolist can produce her output in either of two plants. Having sold all of her output she discovers that the marginal cost in plant 1 is $30 while the marginal cost in plant 2 is $20. To maximize profits the firm will A) produce more output in plant 1 and less in the plant 2. B) do nothing until it acquires more information on revenues. C) produce less output in plant 1 and more in plant 2. D) produce less in both plants until marginal revenue is zero. E) shut down plant 1 and only produce at plant 2 in the future.

C

As the manager of a firm you calculate the marginal revenue is $152 and marginal cost is $200. You should A) expand output. B) do nothing without information about your fixed costs. C) reduce output until marginal revenue equals marginal cost. D) expand output until marginal revenue equals zero. E) reduce output beyond the level where marginal revenue equals zero.

C

Bancroft Pharmaceuticals has a patent on a new medication used to treat high blood pressure, so it is the monopoly seller of this new drug product. The marginal cost of producing one dose of the drug is $10, and the elasticity of demand for the product is -3. What is the profit maximizing monopoly price for this patented drug product? A) $10 B) $12.50 C) $15 D) $30

C

Barbara is a producer in a monopoly industry. Her demand curve, total revenue curve, marginal revenue curve and total cost curve are given as follows: Q = 160 - 4P TR = 40Q - 0.25Q2 MR = 40 - 0.5Q TC = 4Q MC = 4 Refer to Scenario 10.1. How much profit will she make? A) -996 B) 0 C) 1,296 D) 1,568 E) none of the above

C

Compared to the equilibrium price and quantity sold in a competitive market, a monopolist will charge a ________ price and sell a ________ quantity. A) higher; larger B) lower; larger C) higher; smaller D) lower; smaller E) none of these

C

Refer to Scenario 10.5. How many garden hoses should be produced in California in order to maximize profits? A) 1 B) 2 C) 3 D) 4 E) 5

C

Refer to Scenario 10.6. If red rubber balls can be produced at any of the three plants, and John decides to produce 1 red rubber ball, at which plant will he produce it? A) California B) Florida C) Montana D) He is indifferent between California and Florida. E) He is indifferent between Florida and Montana.

C

Scenario 10.3: The demand curve and marginal revenue curve for red herrings are given as follows: Q = 250 - 5P MR = 50 - 0.4Q Refer to Scenario 10.3. The marginal cost of red herrings is given as: MC = 0.6Q. What is the profit-maximizing level of output? A) 0 B) 25 C) 50 D) 60 E) 125

C

The marginal revenue of green ink pads is given as follows: MR = 2500 - 5Q The marginal cost of green ink pads is 5Q. Refer to Scenario 10.7. Suppose that the firm chooses to produce 200 ink pads. At this level of output the demand for ink pads is A) inelastic. B) unit elastic. C) elastic. D) unit elastic.

C

When the demand curve is downward sloping, marginal revenue is A) equal to price. B) equal to average revenue. C) less than price. D) more than price.

C

Which of the following is NOT true regarding monopoly? A) Monopoly is the sole producer in the market. B) Monopoly price is determined from the demand curve. C) Monopolist can charge as high a price as it likes. D) Monopoly demand curve is downward sloping.

C

Which of the following is true at the output level where P=MC? A) The monopolist is maximizing profit. B) The monopolist is not maximizing profit and should increase output. C) The monopolist is not maximizing profit and should decrease output. D) The monopolist is earning a positive profit.

C

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 - 2P MR = 100 - Q TC = 5Q MC = 5 24) Refer to Scenario 10.2. What level of output maximizes total revenue? A) 0 B) 90 C) 95 D) 100

D

At the profit-maximizing level of output, demand is A) completely inelastic. B) inelastic, but not completely inelastic. C) unit elastic. D) elastic, but not infinitely elastic. E) infinitely elastic.

D

Barbara is a producer in a monopoly industry. Her demand curve, total revenue curve, marginal revenue curve and total cost curve are given as follows: Q = 160 - 4P TR = 40Q - 0.25Q2 MR = 40 - 0.5Q TC = 4Q MC = 4 21) Refer to Scenario 10.1. How much output will Barbara produce? A) 0 B) 22 C) 56 D) 72 E) none of the above

D

For a monopolist, changes in demand will lead to changes in A) price with no change in output. B) output with no change in price. C) both price and quantity. D) any of the above can be true.

D

Scenario 10.3: The demand curve and marginal revenue curve for red herrings are given as follows: Q = 250 - 5P MR = 50 - 0.4Q 33) Refer to Scenario 10.3. What level of output maximizes revenue? A) 0 B) 45 C) 85 D) 125 E) 245

D

Scenario 10.3: The demand curve and marginal revenue curve for red herrings are given as follows: Q = 250 - 5P MR = 50 - 0.4Q Refer to Scenario 10.3. At the profit-maximizing level of output, demand is A) completely inelastic. B) inelastic, but not completely inelastic. C) unit elastic. D) elastic, but not infinitely elastic. E) infinitely elastic.

D

Suppose that a firm can produce its output at either of two plants. If profits are maximized, which of the following statements is true? A) The marginal cost at the first plant must equal marginal revenue. B) The marginal cost at the second plant must equal marginal revenue. C) The marginal cost at the two plants must be equal. D) all of the above E) none of the above

D

Suppose that a tax of $2 per unit of output is imposed on red rubber ball producers. What level of output maximizes profit? A) -1 B) 3 C) 4.5 D) 5 E) B, C, and D are correct.

D

The demand curve and marginal revenue curve for red rubber balls are given as follows: Q = 16 - P MR = 16 - 2Q What level of output maximizes profit? A) 0 B) 4 C) 5.5 D) 6 E) B, C and D all maximize profit.

D

The demand for tickets to the Katy Perry concert (Q) is given as follows: Q = 120,000 - 2,000P The marginal revenue is given as: MR = 60 - .001Q The stadium at which the concert is planned holds 60,000 people. The marginal cost of each additional concert goer is essentially zero up to 60,000 fans, but becomes infinite beyond that point. 38) Refer to Scenario 10.4. Given the information above, what are the profit maximizing number of tickets sold and the price of tickets? A) 0, $60 B) 20,000, $50 C) 40,000, $40 D) 60,000, $30 E) 80,000, $20

D

The marginal revenue of green ink pads is given as follows: MR = 2500 - 5Q The marginal cost of green ink pads is 5Q. 50) Refer to Scenario 10.7. How many ink pads will be produced to maximize revenue? A) 0 B) 250 C) 300 D) 500 E) none of the above

D

The marginal revenue of green ink pads is given as follows: MR = 2500 - 5Q The marginal cost of green ink pads is 5Q. The marginal cost of a monopolist is constant and is $10. The marginal revenue curve is given as follows: MR = 100 - 2Q The profit maximizing price is A) $70. B) $65. C) $60. D) $55. E) $50.

D

The monopoly supply curve is the A) same as the competitive market supply curve. B) portion of marginal costs curve where marginal costs exceed the minimum value of average variable costs. C) result of market power and production costs. D) none of the above

D

When a per unit tax is imposed on the sale of a product of a monopolist, the resulting price increase will A) always be less than the tax. B) always be more than the tax. C) always be less than if a similar tax were imposed on firms in a competitive market. D) not always be less than the tax.

D

How much profit will the monopolist whose cost and demand curves are shown below earn at output Q1? A) 0CDQ1 B) 0BEQ1 C) 0AFQ1 D) ACDF E) BCDE

E

To find the profit maximizing level of output, a firm finds the output level where A) price equals marginal cost. B) marginal revenue and average total costAs the manager of a firm you calculate the marginal revenue is $152 and marginal cost is $200. You should A) expand output. C) price equals marginal revenue. D) all of the above E) none of the above

E

Which of the following is NOT true for monopoly? A) The profit maximizing output is the one at which marginal revenue and marginal cost are equal. B) Average revenue equals price. C) The profit maximizing output is the one at which the difference between total revenue and total cost is largest. D) The monopolist's demand curve is the same as the market demand curve. E) At the profit maximizing output, price equals marginal cost.

E