chapter 15

A monopoly firm maximizes its profit by producing 500 units output (so Q = 500). At that level of output, its marginal revenue is $30, its average revenue is $40, and its average total cost is $34. ____ 5. Refer to Scenario 15-3. The firm's profit-maximizing price is a. $30. b. between $30 and $34. c. between $34 and $40. d. $40.

40

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways? a. A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost. b. A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost. c. For a competitive firm, marginal revenue at the profit-maximizing level of output is equal to marginal revenue at all other levels of output; for a monopolist, marginal revenue at the profit-maximizing level of output is smaller than it is for larger levels of output. d. For a profit-maximizing competitive firm, thinking at the margin is much more important than it is for a profit-maximizing monopolist.

A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost.

Refer to Scenario 15-3. At Q = 500, the firm's marginal cost is a. less than $30. b. $30. c. $34. d. greater than $34.

b. $30.

The key difference between a competitive firm and a monopoly firm is the ability to select a. the level of competition in the market. b. the level of production. c. inputs in the production process. d. the price of its output.

the price of its output.

Refer to Scenario 15-3. At Q = 500, the firm's total revenue is a. $15,000. b. $17,500. c. $20,000. d. $22,500.

$20,000.

Selling a good at a price determined by the intersection of the demand curve and the marginal cost curve is consistent with (i) the socially-optimal level of output. (ii) the market solution for profit-maximizing competitive firms. (iii) the market solution for a profit-maximizing monopoly firm. a. (i) and (ii) b. (ii) and (iii) c. (i) and (iii) d. All of the above are correct.

(i) and (ii)

Refer to Scenario 15-3. The firm's maximum profit is a. $2,000. b. $3,000. c. $4,000. d. $6,000.

.$3,000.

If a monopoly sells a quantity of its good that is smaller than the socially-optimal level, the price will be a. socially efficient. b. inefficiently low. c. inefficiently high. d. inefficiently low or inefficiently high; either case can prevail.

inefficiently high.