Managerial Econ CH 8

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:

40.

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:

495.

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:

5.

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:

6.

Which of the following is true under monopolistic competition in the long run?

Profits are always zero.

In the long run, monopolistically competitive firms:

have excess capacity.

One of the sources of monopoly power for a monopoly may be:

patents.

Suppose that is some industry the elasticity of quantity sold with respect to dollars spent on advertising is 2 and the elasticity of demand with respect to price is -6. A firm operating in this environment should allocate ____ of its revenue to spend on advertising.

1/3

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?

Demand will decline.

In the short run firms in an perfectly competitive market at making positive economic profits. Which of the following is most likely to happen in the long run?

In the long run new firms will enter the industry. This will drive price down and will drive profits to zero.

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:

MR(Q) = 200 − 10Q.

Which of the following statements is NOT correct about monopoly?

Monopolists always make positive profits in the long run.

Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets?

There is free entry and long-run profits are zero.

Economies of scale exist whenever:

average total costs decline as output increases.