Micro Econ final exam quiz #11 q's

Table 15-7; Sally owns the only shoe store in town. She has the following cost and revenue information. Refer to Table 15-7. What is the marginal revenue from selling the 2nd pair of shoes?

$140

When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at $9 it sells 62 units. The marginal revenue for the firm over this range is

$23.

Table 15-6; A monopolist faces the following demand curve: Refer to Table 15-6. What is the marginal revenue from the sale of the 3rd unit?

$3

Refer to Figure 15-20. The consumer surplus at the monopolist's profit-maximizing price is

$450.

Refer to Figure 15-9. The deadweight loss caused by a profit-maximizing monopoly amounts to

$500.

Table 15-20; A monopolist faces the following demand curve: Refer to Table 15-20. If a monopolist faces a constant marginal cost of $10, how much output should the firm produce in order to maximize profit?

3 units

Refer to Table 15-1. If the monopolist wants to maximize its revenue, how many units of its product should it sell?

6

Imagine a monopolist could charge a different price to every customer based on how much he or she were willing to pay. How would this affect monopoly profits?

Profits would the highest possible.

Monopolist use the output rule MR = MC, but unlike Perfect Competition P > MR because:

The statement is true, P > MR = MC for a monopolist, which is how they make monopoloy profits

With perfect price discrimination the monopoly

eliminates deadweight loss.

The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?

marginal cost and marginal revenue

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its

marginal revenue is less than the price of the product.

Refer to Figure 15-1. Considering the relationship between average total cost and marginal cost, the marginal cost curve for this firm

must lie entirely below the average total cost curve.

For a monopolist, when the price effect is greater than the output effect, marginal revenue is

negative.

Scenario 15-2; Consider a local, privately-owned electrical cooperative named Poweshiek Power Company (PPCo). PPCo has just completed a clean-coal-burning electrical power plant in Iowa. Currently, PPCo can meet the electricity needs of all residents in the county. In fact, its capacity far exceeds the needs of the county. After just a few years of operation, the shareholders of PPCo experienced incredibly high rates of return on their investment due to the profitability of the corporation. Refer to Scenario 15-2. PPCo will continue to be a monopolist in the electricity industry only if

there are no new entrants to the market.