Module 10 Quiz

The marginal cost of a monopolist is constant and is $10. The demand curve and marginal revenue curves are given as follows: demand: Q = 100 - P marginal revenue: MR = 100 - 2Q The deadweight loss from monopoly power is ________.

$1012.50

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? Select one: a. $5 b. $4050 c. $4950 d. $450

$4050

Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows: P = 360 - 4Q MR = 360 - 8Q MC = 4Q Refer to Scenario 10.9. At the profit maximizing level of output, what is the level of consumer surplus? Select one: a. 3,600 b. 4,800 c. 0 d. 1,800 e. 2,700

1,800

The demand curve and marginal revenue curve for red herrings are given as follows: Q = 250 - 5P MR = 50 - 0.4Q

125

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 ________.

22

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________.

22

Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows: P = 360 - 4Q MR = 360 - 8Q MC = 4Q Refer to Scenario 10.9. What level of output maximizes the sum of consumer surplus and producer surplus?

45

Adriana is a monopolist producing green calculators. The average and marginal cost curves and average and marginal revenue curves for her product are given as follows: AC = Q + (10,000/Q) MC = 2Q AR = 30 - (Q/2) MR = 30 - Q Refer to Scenario 10.8. The deadweight loss from monopoly is ________.

5

Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows: P = 360 - 4Q MR = 360 - 8Q MC = 4Q Refer to Scenario 10.9. At the profit maximizing level of output, what is the level of producer surplus? Select one: a. 7,200 b. 1,800 c. 0 d. 5,400 e. 9,600

5,400

Suppose that the demand equations of women and men for admission to Los Angeles Dodger baseball games are given by: Pw = 6 - (1/8,000)Qw Pm = 10 - (1/8,000)Qm respectively. Moreover, suppose that the total seating capacity of Dodger Stadium is fixed at 56,000. If the ball club elects to practice third-degree price discrimination and would like to fill the stadium, what prices should men and women be charged for a ticket? Pm = $Answer Pw = $Answer

5.5 3.5

The See TV Company is a monopolist in two neighboring countries, East Egg and West Egg. The elasticity of demand for TVs is 4 in East Egg and 10 in West Egg. The price of a TV in East Egg is $60. If the company can successfully separate these two markets, how much should it charge for a TV in West Egg?

50

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? Select one: a. 125 b. 60 c. 25 d. 50 e. 0

50

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 revenue? Select one: a. 250 b. 0 c. 300 d. none of the other choices is correct e. 500

500

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 output will Barbara produce?

72

ppose you own a firm that produces widgets and is a monopoly. The market demand is given by the equation P = 194 - 6Q, where P is the price of gadgets and Q is the quantity of gadgets sold per week. The firm's total cost function is given by the equation. TC = 1977 + 6Q2 What is the profit-maximizing level of output for this firm?

8

Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows: P = 360 - 4Q MR = 360 - 8Q MC = 4Q Refer to Scenario 10.9. At the profit maximizing level of output, what is the deadweight loss?

900

Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows: P = 360 - 4Q MR = 360 - 8Q MC = 4Q Refer to Scenario 10.9. At the profit maximizing level of output, what is the deadweight loss? Select one: a. 0 b. 450 c. none of the above d. 900 e. 1,800

900

Louey's Greasy Spoon restaurant charges $15 for each dinner entree and $5 for each dessert selection, and they offer a dinner special that provide an entree and dessert for $18. If a diner at Louey's assigns zero value to dessert and $19 to an entree, what is their optimal decision?

Buy only the entree

A firm sells an identical product to two groups of consumers, A and B. The firm has decided that third-degree price discrimination is feasible and wishes to set prices that maximize profits. Which of the following best describes the price and output strategy that will maximize profits?

MRA = MRB = MC.

MNO Limited publishes a magazine targeted at urban professionals who live on the east and west coasts of the U.S., and all of the magazines are printed at a marginal cost of $0.50 per copy at a publishing plant in Kansas. If the East Coast elasticity of demand for the magazine is -1.25 and the West Coast elasticity of demand is -1.50, what prices should MNO Limited charge for the magazines in these two markets in order to maximize profits?

Price should be $1.50 on the West Coast and $2.50 on the East Coast

You produce stereo components for sale in two markets, foreign and domestic, and the two groups of consumers cannot trade with one another. If your firm practices third-degree price discrimination to maximize profits, the marginal revenue

a. in the domestic market will equal the marginal revenue in the domestic market. b. in the domestic market will equal the marginal cost. c. in the foreign market will equal the marginal cost. d. none of the above e. all of the above*****

If a monopolist is producing a quantity that generates MC = P, then profit:

can be increased by decreasing production.

If a monopolist is producing a quantity that generates MC > MR, then profit:

can be increased by increasing price.

A Japanese steel firm sells steel in the United States and in Japan. Since the United States buys steel from a number of sources, the U.S. demand for Japanese steel is more price-elastic than the Japanese demand for Japanese steel. If the Japanese steel firm wishes to maximize its profits, it should:

charge a lower price in the United States and a higher price in Japan.

Suppose GoSports pennant monopoly is broken up and the pennant industry becomes perfectly competitive. We would expect the ________ to increase from the breakup and ________ to decrease from the breakup.

consumer surplus and total surplus; producer surplus

One of the major differences between a monopolist and a purely competitive firm is that the monopolist has a ________ demand curve, while the purely competitive firm has a ________ demand curve.

downward-sloping; perfectly elastic

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 Select one: a. elastic. b. unit elastic. c. inelastic. d. unit elastic.

elastic

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

elastic, but not infinitely elastic.

Because tourist demand for airline flights is relatively ________, small ________ in ticket price will result in relatively ________ in additional tourists.

elastic; reductions; large increases

A firm is charging a different price for each unit purchased by a consumer. This is called

first-degree price discrimination.

Suppose the price elasticity of demand for coffee at the CoffeeBarn equals 1.71 for women and 0.55 for men. A successful price discrimination strategy would lead to:

higher prices for men and lower prices for women as long as the CoffeeBarn could prevent women from reselling drinks to men.

In order to maximize profits, an airline will offer ________ prices to customers with ________ demand.

higher; inelastic

The municipal swimming pool charges lower entrance fees to local residents than to nonresidents. Assuming that this pricing strategy increases the profits of the pool, we can conclude that nonresidents must have a ________ for swimming at the pool than residents.

less elastic demand

You produce stereo components for sale in two markets, foreign and domestic, and the two groups of consumers cannot trade with one another. You will charge the higher price in the market with the

lower own price elasticity of demand (more inelastic demand).

Amtrak charges lower fares to students than to its other passengers. This pricing strategy increases Amtrak's profits. From this information, we can conclude that students must have a ________ for Amtrak train service than other passengers.

more price-elastic demand

Suppose a perfectly competitive market is suddenly transformed into one that operates as a monopoly market. We would expect:

price to rise, output to fall, consumer surplus to fall, producer surplus to rise, and deadweight loss to rise.

Because business travelers' demand for airline flights is relatively ________, small increases in price will result in relatively ________ in additional business travelers.

price-inelastic; small decreases

The deadweight loss associated with a monopoly will decrease if:

the monopolist is force to charge a price equal to marginal cost