Microeconomics Chapter 9

Using the table below, please calculate the total profit (π) for this monopoly at output level Q=4.

$1950

Using the table below, calculate the total profit (π) for this monopoly at output level Q=4.

$425 Total profit is the sum of marginal profits. To find total profit at output level Q=4, add the marginal profits through Q=4. 200+150+75+0=$425

Which of the following is evidence of predatory pricing? A. A firm is selling a service for less than its average variable cost. B. A firm entices customers to purchase products together for a lower price than if customers were to purchase separately. C. A firm raises prices in hopes to convince customers its products are more desirable. D. A firm makes the purchase of one product contingent on the purchase of another.

A. A firm is selling a service for less than its average variable cost.

What is the name for the legal, technological, or market forces that discourage or prevent potential competitors from entering monopoly market? A. Barriers to entry B. Production frontier C. Oligopoly D. Perfect competition

A. Barriers to entry

Which industry would be most likely to face a long-run average cost (LRAC) curve and demand curve like the ones represented in the following graph. A. Electricity B. Clothing C. Cosmetics D. Automobile

A. Electricity Reason: once the electric company installs lines in a new subdivision, the marginal cost of providing additional electrical service to one more home is minimal. It would be costly for second electricity company to enter the market.

Once a water company lays the main water pipes through a neighborhood, the marginal cost of providing water service to another home is fairly low. Where will demand curve for water intersect the long-run average cost (LRAC) curve for this company? A. The demand curve intersects the LRAC curve at its downward-sloping part. B. The demand curve intersects the LRAC curve at its upward-sloping part. C. The demand curve intersects the LRAC curve at every point. D. The demand curve intersects the LRAC curve at its flat-part.

A. The demand curve intersects the LRAC curve at its downward-sloping part. Reason: A natural monopoly occurs when the quantity demanded is less than the minimum quantity it takes to be at the bottom of the long-run average cost curve.

Can a perfectly competitive firm sell any quantity along its demand curve at the same price? A. Yes, it can sell either a relatively low quantity or a relatively high quantity at the set market price. B. No, it can sell neither a relatively low quantity nor a relatively high quantity at the set market price. C. Yes, but the firm does not get to choose what quantity it produces. D. No, the firm does not get to choose the quantity it produces.

A. Yes, it can sell either a relatively low quantity or a relatively high quantity at the set market price.

______________ occurs when an exiting firm (or firms) reacts to a new firm by dropping prices very low and, as a result, drives the new firm out of the market. The existing firm then raises prices again. A. Tying sales B. Minimum price contract C. Predatory pricing D. Bundle dealing

C. Predatory pricing

T/F A natural monopoly occurs when the quantity demanded is more than the minimum quantity it takes to be at the bottom of the long-run average cost curve.

False Reason: when economies of scale are large relative to the quantity demanded in a market, a natural monopoly arises. Graphically, a natural monopoly occurs when the quantity demanded is less than the minimum quantity it takes to be at the bottom of the long-run average cost curve.

T-Rex Tent Rental has a monopoly on one of its services. The company is currently producing 119 units for a total revenue of $5,950. If the total revenue for producing 120 units is $5,880, what is the marginal revenue of the 120th unit?

MR = $-70 5,880-5,950/120-119 = -70/1

Sunflower Realty has a monopoly on one of its services. The company is currently producing 406 units and is considering increasing sales to 407 units. Using the table below what is the marginal revenue of the 407th unit? Quantity: 406 Total Revenue: $18,270 Quantity: 407. Total Revenue: $18,329

MR: $59 18,329-18,270/ 407-406

If the profit-maximizing output for the monopoly firm below is Q=4, what is the marginal revenue at Q=4?

MR= $175 MP+MC 175+0= 175

What is the marginal revenue for the 6th unit?

MR= $200 $4,200-$4,000

Optical Innovations, Inc. has a monopoly on one of its products. The company is currently producing 459 units. Help them decide if they should increase output one more unit. What is the marginal revenue of the 460th unit?

MR=$50

The table shows the demand schedule for a product produced by a monopolist. What is the marginal revenue of the 12th unit? Remember: Total Revenue=Price×Quantity include a negative sign in your answer if necessary.

MR=-7 48-55/12-11 = -7/1 MR= change in total revenue/change in quantity

Firm A wants to ensure it is producing at its profit-maximizing output. Evaluate the table below of Firm A's marginal revenue and marginal cost. What is its profit-maximizing output?

Q= 30 MR=MC

A monopolist had not backed up its records of marginal revenue and marginal cost when the office's computer unexpectedly crashed. The marginal profits file was safe and is presented in the table below. At what quantity is this firm's profit-maximizing output?

Q=4 The only line with 0

Marginal revenue, marginal cost, average cost, and demand for a monopolist can be seen on the graphs below. Assume the firm is producing at the profit-maximizing level of output. Select the graph with the shading that represents this monopolist's profit.

Reason: This is determined by finding where MR=MC and then moving up to the demand curve to determine the price. This price times the quantity equals total revenue. To determine the profit subtract the total cost from the total revenue. Total cost for this firm is equal to the average cost at MR=MC times the quantity. The shaded box is what is left of the total revenue after these total costs are subtracted: this is the firm's profit.

Using the table below, calculate the total profit (π) for this monopoly at output level Q=5.

Total profit at Q5= $305 200+150+75+0+(-120) = 305

Using the table below, calculate the total profit (π) for this monopoly at output level Q=20. Note that the table includes marginal revenue and marginal cost for each group of 5 units: for example, the marginal revenue of the first 5 units together is $1,500. Adding another group of 5 units yields additional revenue of $1,200.

π=500+700+250+0=$1,450