TB: Ch. 25

A rm has discovered a new kind of non-fattening, non-habit forming dessert called zwie. It doesn't taste very good, but some people like it and it can be produced from old newspapers at zero marginal cost. Before any zwie can be produced, the rm would have to spend a xed cost of $F. Demand for zwie is given by the equation q = 20p. The rm has a patent on zwie, so it can have a monopoly in this market. (a) The rm will produce zwie only if F is less than or equal to 100. (b) The rm will not produce zwie if F >20. (c) The rm will produce 20 units of zwie. (d) The rm will produce 15 units of zwie. (e) None of the above.

A

A rm has discovered a new kind of non-fattening, non-habit forming dessert called zwie. It doesn't taste very good, but some people like it and it can be produced from old newspapers at zero marginal cost. Before any zwie can be produced, the rm would have to spend a xed cost of $F. Demand for zwie is given by the equation q = 22p. The rm has a patent on zwie, so it can have a monopoly in this market. (a) The rm will produce zwie only if F is less than or equal to 121. (b) The rm will not produce zwie if F >22. (c) The rm will produce 22 units of zwie. (d) The rm will produce 16.50 units of zwie. (e) None of the above.

A

A monopolist faces a constant marginal cost of $1 per unit and has no xed costs. If the price elasticity of demand for this product is constant and equal to 3; then: (a) to maximize prots, he should charge a price of 1.50. (b) to maximize prots, he should charge a price of 3. (c) to maximize prots, he should charge a price of 1.33. (d) he is not maximizing prots. (e) none of the above

A

A monopolist faces a constant marginal cost of $1 per unit and has no xed costs. If the price elasticity of demand for this product is constant and equal to 5; then: (a) to maximize prots, he should charge a price of 1.25. (b) to maximize prots, he should charge a price of 5. (c) to maximize prots, he should charge a price of 1.20. (d) he is not maximizing prots. (e) none of the above

A

A prot-maximizing monopolist faces the demand curve, q = 1003p. It produces at a con- stant marginal cost of $20 per unit. A quantity tax of $10 per unit is imposed on the monopolist's product. The price of the monopolist's product: (a) rises by $5. (b) rises by $10. (c) rises by $20. (d) rises by $12. (e) stays constant.

A

Peter Morgan sells pigeon pies from his pushcart in Central Park. Due to the abundant supplies of raw materials, his costs are zero. The demand schedule for his pigeon pies is p(y) = 70 y=3. What level of output will maximize Peter's prots? (a) 105 (b) 21 (c) 210 (d) 315 (e) None of the above

A

Peter Morgan sells pigeon pies from his pushcart in Central Park. Due to the abundant supplies of raw materials, his costs are zero. The demand schedule for his pigeon pies is p(y) = 90 y=4. What level of output will maximize Peter's prots? (a) 180 (b) 36 (c) 360 (d) 540 (e) None of the above

A

The Cleveland Visitors Bureau is the exclusive national marketer of weekend getaway vacations in Cleveland, Ohio. At current market prices, the price elasticity of demand is 1. To maximize prots, the bureau should (a) Raise prices. (b) Lower prices. (c) Do not change prices. (d) More information is needed to make an accurate judgement. (e) Run new TV commercials.

A

The Cleveland Visitors Bureau is the exclusive national marketer of weekend getaway va- cations in Cleveland, Ohio. At current market prices, the price elasticity of demand is 0.50. To maximize prots, the bureau should (a) Raise prices. (b) Lower prices. (c) Do not change prices. (d) More information is needed to make an accurate judgement. (e) Run new TV commercials.

A

The demand for Professor Bongmore's new book is given by the function Q = 1; 000100p. If the cost of having the book typeset is 12,000, if the marginal cost of printing an extra copy is 4, and if he has no other costs, then he would maximize his prots by: (a) having it typeset and selling 300 copies. (b) having it typeset and selling 500 copies. (c) not having it typeset and not selling any copies. (d) having it typeset and selling 600 copies. (e) having it typeset and selling 150 copies.

A

The demand for Professor Bongmore's new book is given by the function Q = 5; 000100p. If the cost of having the book typeset is 7,000, if the marginal cost of printing an extra copy is 4, and if he has no other costs, then he would maximize his prots by: (a) having it typeset and selling 2,300 copies. (b) having it typeset and selling 2,500 copies. (c) not having it typeset and not selling any copies. (d) having it typeset and selling 4,600 copies. (e) having it typeset and selling 1,150 copies.

A

A rm has invented a new beverage called Slops. It doesn't taste very good, but it gives people a craving for Lawrence Welk's music and Professor Johnson's jokes. Some people are willing to pay money for this eect, so the demand for Slops is given by the equation q = 10p. Slops can be made at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before any Slops can be produced, the rm must undertake a xed cost of 30. Since the in- ventor has a patent on Slops, it can be a monopolist in this new industry. (a) The rm will produce 5 units of Slops. (b) A Pareto improvement could be achieved by having the government pay the rm a subsidy of 35 and insisting that the rm oer Slops at zero price. (c) From the point of view of social eciency, it is best that no Slops be produced. (d) The rm will produce 10 units of Slops. (e) None of the other options are correct.

B

A rm has invented a new beverage called Slops. It doesn't taste very good, but it gives people a craving for Lawrence Welk's music and Professor Johnson's jokes. Some people are willing to pay money for this eect, so the demand for Slops is given by the equation q = 10p. Slops can be made at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before any Slops can be produced, the rm must undertake a xed cost of 30. Since the in- ventor has a patent on Slops, it can be a monopolist in this new industry. (a) The rm will produce 5 units of Slops. (b) A Pareto improvement could be achieved by having the government pay the rm a subsidy of 35 and insisting that the rm oer Slops at zero price. (c) From the point of view of social eciency, it is best that no Slops be produced. (d) The rm will produce 10 units of Slops. (e) None of the other options are correct. Topic

B

A rm has invented a new beverage called Slops. It doesn't taste very good, but it gives people a craving for Lawrence Welk's music and Professor Johnson's jokes. Some people are willing to pay money for this eect, so the demand for Slops is given by the equation q = 12p. Slops can be made at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before any Slops can be produced, the rm must undertake a xed cost of 41. Since the in- ventor has a patent on Slops, it can be a monopolist in this new industry. (a) The rm will produce 6 units of Slops. (b) A Pareto improvement could be achieved by having the government pay the rm a subsidy of 46 and insisting that the rm oer Slops at zero price. (c) From the point of view of social eciency, it is best that no Slops be produced. (d) The rm will produce 12 units of Slops. (e) None of the other options are correct.

B

A rm has invented a new beverage called Slops. It doesn't taste very good, but it gives people a craving for Lawrence Welk's music and Professor Johnson's jokes. Some people are willing to pay money for this eect, so the demand for Slops is given by the equation q = 16p. Slops can be made at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before any Slops can be produced, the rm must undertake a xed cost of 69. Since the in- ventor has a patent on Slops, it can be a monopolist in this new industry. (a) The rm will produce 8 units of Slops. (b) A Pareto improvement could be achieved by having the government pay the rm a subsidy of 74 and insisting that the rm oer Slops at zero price. (c) From the point of view of social eciency, it is best that no Slops be produced. (d) The rm will produce 16 units of Slops. (e) None of the other options are correct. Topic

B

A rm has invented a new beverage called Slops. It doesn't taste very good, but it gives people a craving for Lawrence Welk's music and Professor Johnson's jokes. Some people are willing to pay money for this eect, so the demand for Slops is given by the equation q = 18p. Slops can be made at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before any Slops can be produced, the rm must undertake a xed cost of 86. Since the in- ventor has a patent on Slops, it can be a monopolist in this new industry. (a) The rm will produce 9 units of Slops. (b) A Pareto improvement could be achieved by having the government pay the rm a subsidy of 91 and insisting that the rm oer Slops at zero price. (c) From the point of view of social eciency, it is best that no Slops be produced. (d) The rm will produce 18 units of Slops. (e) None of the above.

B

A rm has invented a new beverage called Slops. It doesn't taste very good, but it gives people a craving for Lawrence Welk's music and Professor Johnson's jokes. Some people are willing to pay money for this eect, so the demand for Slops is given by the equation q = 18p. Slops can be made at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before any Slops can be produced, the rm must undertake a xed cost of 86. Since the in- ventor has a patent on Slops, it can be a monopolist in this new industry. (a) The rm will produce 9 units of Slops. (b) A Pareto improvement could be achieved by having the government pay the rm a subsidy of 91 and insisting that the rm oer Slops at zero price. (c) From the point of view of social eciency, it is best that no Slops be produced. (d) The rm will produce 18 units of Slops. (e) None of the other options are correct.

B

A rm has invented a new beverage called Slops. It doesn't taste very good, but it gives people a craving for Lawrence Welk's music and Professor Johnson's jokes. Some people are willing to pay money for this eect, so the demand for Slops is given by the equation q = 20p. Slops can be made at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before any Slops can be produced, the rm must undertake a xed cost of 105. Since the inventor has a patent on Slops, it can be a monopolist in this new industry. (a) The rm will produce 10 units of Slops. (b) A Pareto improvement could be achieved by having the government pay the rm a subsidy of 110 and insisting that the rm oer Slops at zero price. (c) From the point of view of social eciency, it is best that no Slops be produced. (d) The rm will produce 20 units of Slops. (e) None of the above

B

A monopolist enjoys a monopoly over the right to sell automobiles on a certain island. He imports automobiles from abroad at a cost of $10,000 each and sells them at the price that maximizes prots. One day, the island's government annexes a neighboring island and extends the monopolist's monopoly rights to this island. People on the annexed island have the same tastes and incomes and there are just as many people as on the rst. (a) The monopolist doubles his price and his sales stay constant. (b) The monopolist keeps his price constant and his sales double. (c) The monopolist raises his price but does not necessarily double it. (d) The monopolist's prots more than double. (e) None of the above.

B

A monopolist receives a subsidy from the government for every unit of output that is con- sumed. He has constant marginal costs and the subsidy that he gets per unit of output is greater than his marginal cost of production. But to get the subsidy on a unit of output, somebody has to consume it. From these facts we can conclude that: (a) he will pay consumers to consume his product. (b) if he sells at a positive price, demand must be inelastic at that price. (c) he will sell at a price where demand is elastic. (d) he will give the good away. (e) None of the above.

B

A prot-maximizing monopolist faces a demand function given by q = 100020p where p is the price of her output in dollars. She has a constant marginal cost of 20 dollars per unit of output. In an eort to induce her to increase her output, the government agrees to pay her a subsidy of 10 dollars for every unit that she produces. In response to the subsidy, she will: (a) increase her price and lower her output. (b) decrease her price by $5 per unit. (c) decrease her price by $10 per unit. (d) decrease her price by more than $10 per unit, but by less than $16 per unit. (e) decrease her price by more than $16 per unit.

B

An industry has two rms, a leader and a follower. The demand curve for the industry's output is given by the function p = 320 4q; where q is total industry output. Each rm has zero marginal cost. The leader chooses his quantity rst, knowing that the follower will observe the leader's choice and choose his quantity to maximize prots, given the quantity produced by the leader. The leader will choose an output of: (a) 26.67. (b) 40. (c) 20. (d) 80. (e) None of the above.

B

An industry has two rms, a leader and a follower. The demand curve for the industry's output is given by the function p = 802q; where q is total industry output. Each rm has zero marginal cost. The leader chooses his quantity rst, knowing that the follower will observe the leader's choice and choose his quantity to maximize prots, given the quantity produced by the leader. The leader will choose an output of: (a) 13.33. (b) 20. (c) 10. (d) 40. (e) None of the above.

B

In a market with inverse demand curve P = 10Q; Brand X is a monopolist with no xed costs and with a marginal cost of 2. If marginal cost rises to 4, by how much will the price of Brand X rise? (a) 2 (b) 1 (c) 3 (d) No change, the rm is already charging the monopoly price. (e) None of the above.

B

The demand curve for the output of a certain industry is linear, q = A Bp. There are constant marginal costs of C. For all values of A, B; and C such thatA > 0; B > 0; and 0 < C < A=B : (a) if the industry is monopolized, prices will be exactly twice as high as they would be if the industry were competitive. (b) if the industry is competitive, output will be exactly twice as great as it would be if the industry were monopolized. (c) if the industry is monopolized, prices will be more than twice as high as if the industry is competitive. (d) if the industry is monopolized, output will be more than half as large as it would be if the industry were competitive. (e) None of the above.

B

The demand for a monopolist's output is 7000 divided by the square of the price in dollars that it charges per unit. The rm has constant marginal costs equal to 1 dollar per unit. To maximize its prots it should charge a price of: (a) 1. (b) 2. (c) 3. (d) 1.5. (e) 2.5.

B

A major software developer has estimated the demand for its new personal nance software package to be Q = 1; 000; 000P1:10 while the total cost of the package is C = 400; 000+ 20Q. If this rm wishes to maximize prot, what percentage markup should it place on this product? (a) 1,020%. (b) 1,100%. (c) 1,000%. (d) 850%. (e) 1,150%.

C

A major software developer has estimated the demand for its new personal nance software package to be Q = 1; 000; 000P1:40 while the total cost of the package is C = 100; 000+ 20Q. If this rm wishes to maximize prot, what percentage markup should it place on this product? (a) 230%. (b) 150%. (c) 250%. (d) 340%. (e) 200%.

C

A monopolist faces a demand function Q = 2; 000=(p+ 8)2. If she charges a price of p; her marginal revenue will be: (a) p=2+ 8 (b) 2p+ 4 (c) p=2 8=2. (d) 2(p+ 8)3 (e) (p + B)2

C

A monopolist faces a demand function Q = 4; 000=(p+ 7)2. If she charges a price of p; her marginal revenue will be: (a) p=2+ 7 (b) 2p+ 3:50 (c) p=2 7=2. (d) 2(p+ 7)3 (e) (p + B)2

C

A monopolist faces the demand curve q = 110p=2 where q is the number of units sold and p is the price in dollars. He has quasi-xed costs, C; and constant marginal costs of $20 per unit of output. Therefore his total costs are C + 20q if q > 0 and 0 if q = 0. What is the largest value of C for which he would be willing to produce positive output? (a) $20 (b) $4,000 (c) $5,000 (d) $7,500 (e) $6,000

C

A monopolist faces the demand curve q = 115p=2 where q is the number of units sold and p is the price in dollars. He has quasi-xed costs, C; and constant marginal costs of $30 per unit of output. Therefore his total costs are C + 30q if q > 0 and 0 if q = 0. What is the largest value of C for which he would be willing to produce positive output? (a) $30 (b) $4,000 (c) $5,000 (d) $7,500 (e) $6,000

C

A monopolist faces the inverse demand function described by p = 292q where q is output. The monopolist has no xed cost and his marginal cost is 6 at all levels of output. Which of the following expresses the monopolist's prots as a function of his output? (a) 29 2q 6 (b) 29 4q (c) 23q 2q2 (d) 29q 2q2 6 (e) None of the above.

C

A monopolist faces the inverse demand function described by p = 325q where q is output. The monopolist has no xed cost and his marginal cost is 7 at all levels of output. Which of the following expresses the monopolist's prots as a function of his output? (a) 32 5q 7 (b) 32 10q (c) 25q 5q2 (d) 32q 5q2 7 (e) None of the above.

C

A monopolist has decreasing average costs as output increases. If the monopolist sets price equal to average cost, it will: (a) produce too much output from the standpoint of eciency. (b) lose money. (c) produce too little output from the standpoint of eciency. (d) maximize its prots. (e) face excess demand.

C

A monopolist produces at a point where the price elasticity of demand is :7 and the marginal cost is 2. If you were hired to advise this monopolist on how to increase his prots, you would nd that the way to increase his prots is to: (a) increase his output. (b) lower the price. (c) decrease his output. (d) produce the output level where marginal cost equals price. (e) increase his advertising eorts.

C

A natural monopolist has the a total cost function c(q) = 350 + 20q where q is its output. The inverse demand function for the monopolist's product is p = 1002q. Government regulations require this rm to produce a positive amount and to set price equal to average cost. To comply with these requirements: (a) is impossible for this rm. (b) the rm must produce 40 units. (c) the rm could produce either 5 units or 35 units. (d) the rm must charge a price of 70. (e) the rm must produce 20 units.

C

A prot-maximizing monopolist has the cost schedule, c(y) = 10y. The demand for her product is given by y = 800=p3 where p is her price. Suppose that the government tries to get her to increase her output by giving her a subsidy of 18 dollars for every unit that she sells. Giving her the subsidy would make her: (a) decrease her price by 9 dollars. (b) decrease her price by 18 dollars. (c) decrease her price by 27 dollars. (d) decrease her price by 45 dollars. (e) leave her price unchanged.

C

A prot-maximizing monopolist has the cost schedule, c(y) = 30y. The demand for her product is given by y = 700=p2 where p is her price. Suppose that the government tries to get her to increase her output by giving her a subsidy of 8 dollars for every unit that she sells. Giving her the subsidy would make her: (a) decrease her price by 4 dollars. (b) decrease her price by 8 dollars. (c) decrease her price by 16 dollars. (d) decrease her price by 24 dollars. (e) leave her price unchanged.

C

A prot-maximizing monopoly faces an inverse demand function described by the equa- tion p(y) = 60y and its total costs are c(y) = 7y; where prices and costs are measured in dollars. In the past it was not taxed, but now it must pay a tax of 2 dollars per unit of output. After the tax, the monopoly will (a) increase its price by 2. (b) increase its price by 3. (c) increase its price by 1. (d) leave its price constant. (e) None of the other options are correct.

C

A prot-maximizing monopoly faces an inverse demand function described by the equation p(y) = 100 y and its total costs are c(y) = 7y; where prices and costs are measured in dollars. In the past it was not taxed, but now it must pay a tax of 4 dollars per unit of output. After the tax, the monopoly will: (a) increase its price by 4. (b) increase its price by 6. (c) increase its price by 2. (d) leave its price constant. (e) none of the above.

C

A prot-maximizing monopoly faces an inverse demand function described by the equation p(y) = 40y and its total costs are c(y) = 9y; where prices and costs are measured in dollars. In the past it was not taxed, but now it must pay a tax of 8 dollars per unit of output. After the tax, the monopoly will: (a) increase its price by 8. (b) increase its price by 12. (c) increase its price by 4. (d) leave its price constant. (e) none of the above.

C

A prot-maximizing monopoly faces an inverse demand function described by the equation p(y) = 60y and its total costs are c(y) = 10y; where prices and costs are measured in dollars. In the past it was not taxed, but now it must pay a tax of 6 dollars per unit of output. After the tax, the monopoly will (a) increase its price by 6. (b) increase its price by 9. (c) increase its price by 3. (d) leave its price constant. (e) None of the other options are correct

C

A prot-maximizing monopoly faces an inverse demand function described by the equation p(y) = 70y and its total costs are c(y) = 6y; where prices and costs are measured in dollars. In the past it was not taxed, but now it must pay a tax of 8 dollars per unit of output. After the tax, the monopoly will (a) increase its price by 8. (b) increase its price by 12. (c) increase its price by 4. (d) leave its price constant. (e) None of the other options are correct.

C

A prot-maximizing monopoly faces an inverse demand function described by the equation p(y) = 70y and its total costs are c(y) = 7y; where prices and costs are measured in dollars. In the past it was not taxed, but now it must pay a tax of 6 dollars per unit of output. After the tax, the monopoly will (a) increase its price by 6. (b) increase its price by 9. (c) increase its price by 3. (d) leave its price constant. (e) None of the other options are correct

C

A prot-maximizing monopoly faces an inverse demand function described by the equation p(y) = 70y and its total costs are c(y) = 9y; where prices and costs are measured in dollars. In the past it was not taxed, but now it must pay a tax of 6 dollars per unit of output. After the tax, the monopoly will (a) increase its price by 6. (b) increase its price by 9. (c) increase its price by 3. (d) leave its price constant. (e) None of the other options are correct.

C

Charlie can work as many hours as he wishes at a local fast food restaurant for a wage of $4 per hour. Charlie also does standup comedy. Since Charlie lives in a quiet, rather solemn midwestern town, he is the town's only comedian and has a local monopoly for standup comedy. The demand for comedy is Q = 40P where Q is the number of hours of comedy performed per week and P is the price charged per hour of comedy. When Charlie maximizes his utility, he spends at least one hour per week working at the restaurant and he gets at least one hour of leisure time. His utility depends only on income and leisure. How many hours per week does he perform standup comedy? (a) 36 (b) 40 (c) 18 (d) 20 (e) We can't tell without knowing his utility function.

C

In Problem 24.1, if demand for the book is Q = 1; 200300p; the marginal revenue function is given by: (a) 300 (b) 1; 200 600 (c) 4 Q=150 (d) 4Q Q2=300 (e) 1=300

C

In Problem 24.1, if demand for the book is Q = 1; 300200p; the marginal revenue function is given by: (a) 200 (b) 1; 300 400 (c) 6:50 Q=100 (d) 6:50Q Q2=200 (e) 1=200

C

In Problem 24.1, if demand for the book is Q = 1; 400400p; the marginal revenue function is given by: (a) 400 (b) 1; 400 800 (c) 3:50 Q=200 (d) 3:50Q Q2=400 (e) 1=400

C

In Problem 24.1, if demand for the book is Q = 1; 900300p; the marginal revenue function is given by: (a) 300 (b) 1; 900 600 (c) 6:33 Q=150 (d) 6:33Q Q2=300 (e) 1=300

C

In Problem 24.1, if demand for the book is Q = 900 300p; the marginal revenue function is given by: (a) 300 (b) 900 600 (c) 3 Q=150 (d) 3Q Q2=300 (e) 1=300

C

In Problem 24.1, if the demand schedule for Bong's book is Q = 1; 000 100p; the cost of having the book typeset is 6,000, and the marginal cost of printing an extra book is $4, then he would maximize his prots by (a) having it typeset and selling 300 copies. (b) having it typeset and selling 500 copies. (c) not having it typeset and not selling any copies. (d) having it typeset and selling 600 copies. (e) having it typeset and selling 150 copies.

C

In Problem 24.1, if the demand schedule for Bong's book is Q = 2; 000 100p; the cost of having the book typeset is 9,000, and the marginal cost of printing an extra book is $4, then he would maximize his prots by (a) having it typeset and selling 800 copies. (b) having it typeset and selling 1,000 copies. (c) not having it typeset and not selling any copies. (d) having it typeset and selling 1,600 copies. (e) having it typeset and selling 400 copies.

C

In Problem 24.1, if the demand schedule for Bong's book is Q = 3; 000 100p; the cost of having the book typeset is 6,000, and the marginal cost of printing an extra book is $4, then he would maximize his prots by (a) having it typeset and selling 1,300 copies. (b) having it typeset and selling 1,500 copies. (c) not having it typeset and not selling any copies. (d) having it typeset and selling 2,600 copies. (e) having it typeset and selling 650 copies.

C

In Problem 24.1, if the demand schedule for Bong's book is Q = 3; 000 100p; the cost of having the book typeset is 8,000, and the marginal cost of printing an extra book is $4, then he would maximize his prots by (a) having it typeset and selling 1,300 copies. (b) having it typeset and selling 1,500 copies. (c) not having it typeset and not selling any copies. (d) having it typeset and selling 2,600 copies. (e) having it typeset and selling 650 copies.

C

In Problem 24.1, if the demand schedule for Bong's book is Q = 4; 000 100p; the cost of having the book typeset is 11,000, and the marginal cost of printing an extra book is $4, then he would maximize his prots by (a) having it typeset and selling 1,800 copies. (b) having it typeset and selling 2,000 copies. (c) not having it typeset and not selling any copies. (d) having it typeset and selling 3,600 copies. (e) having it typeset and selling 900 copies.

C

In Problem 24.6, if there are no xed costs and marginal cost is constant at 16, the price elasticity of demand at the prot-maximizing level of output is closest to: (a) 0:72 (b) 2:76 (c) 1:38 (d) 5:52 (e) 0:36

C

In Problem 24.6, if there are no xed costs and marginal cost is constant at 20, the price elasticity of demand at the prot-maximizing level of output is closest to: (a) 0:67 (b) 3 (c) 1:50 (d) 6 (e) 0:33

C

In Problem 24.6, if there are no xed costs and marginal cost is constant at 48, the price elasticity of demand at the prot-maximizing level of output is closest to: (a) 0:35 (b) 5:69 (c) 2:85 (d) 11:38 (e) 0:18

C

In Problem 24.6, if there are no xed costs and marginal cost is constant at 56, the price elasticity of demand at the prot-maximizing level of output is closest to: (a) 0:28 (b) 7:09 (c) 3:55 (d) 14:18 (e) 0:14

C

The Hard Times Concrete company is a monopolist in the concrete market. It uses two inputs, cement and gravel, which it buys in competitive markets. The company's production func- tion is q = c1=2g1=2 where q is its output, c is the amount of cement it uses, and g is the amount of gravel it uses. If the price of cement goes up the rm's demand for cement: (a) goes down and its demand for gravel goes up. (b) goes down and its demand for gravel goes down. (c) goes down and its demand for gravel may go up, down, or remain the same, depending on the demand function for concrete. (d) may go up, down, or not change, based on whether the cement's elasticity of demand is less than, equal to, or greater than 1. (e) could go up or down, but must move in the opposite direction from its demand for gravel.

C

The demand for Professor Bongmore's new book is given by the function Q = 2; 000100p. If the cost of having the book edited and typeset is 17,000, if the marginal cost of printing an extra copy is 4, and if he has no other costs, then he would maximize his prots by 12 (a) having it edited and typeset and selling 800 copies. (b) having it edited and typeset and selling 1,000 copies. (c) not having it edited and typeset and not selling any copies. (d) having it edited and typeset and selling 1,600 copies. (e) having it typeset and selling 400 copies.

C

The demand for Professor Bongmore's new book is given by the function Q = 2; 000100p. If the cost of having the book edited and typeset is 8,000, if the marginal cost of printing an extra copy is 4, and if he has no other costs, then he would maximize his prots by 12 (a) having it edited and typeset and selling 800 copies. (b) having it edited and typeset and selling 1,000 copies. (c) not having it edited and typeset and not selling any copies. (d) having it edited and typeset and selling 1,600 copies. (e) having it typeset and selling 400 copies.

C

The demand for Professor Bongmore's new book is given by the function Q = 4; 000100p. If the cost of having the book edited and typeset is 20,000, if the marginal cost of printing an extra copy is 4, and if he has no other costs, then he would maximize his prots by 22 (a) having it edited and typeset and selling 1,800 copies. (b) having it edited and typeset and selling 2,000 copies. (c) not having it edited and typeset and not selling any copies. (d) having it edited and typeset and selling 3,600 copies. (e) having it typeset and selling 900 copies.

C

The demand for Professor Bongmore's new book is given by the function Q = 4; 000100p. If the cost of having the book edited and typeset is 25,000, if the marginal cost of printing an extra copy is 4, and if he has no other costs, then he would maximize his prots by 22 (a) having it edited and typeset and selling 1,800 copies. (b) having it edited and typeset and selling 2,000 copies. (c) not having it edited and typeset and not selling any copies. (d) having it edited and typeset and selling 3,600 copies. (e) having it typeset and selling 900 copies.

C

The demand for Professor Bongmore's new book is given by the function Q = 6; 000100p. If the cost of having the book edited and typeset is 11,000, if the marginal cost of printing an extra copy is 4, and if he has no other costs, then he would maximize his prots by 32 (a) having it edited and typeset and selling 2,800 copies. (b) having it edited and typeset and selling 3,000 copies. (c) not having it edited and typeset and not selling any copies. (d) having it edited and typeset and selling 5,600 copies. (e) having it typeset and selling 1,400 copies.

C

The demand for a monopolist's output is 10,000 divided by the square of the price he charges. The monopolist produces at a constant marginal cost of $5. If the government imposes a sales tax of $10 per unit on the monopolist's output, the monopolists price will rise by: (a) $5. (b) $10. (c) $20. (d) $12. (e) None of the above.

C

The demand for a monopolist's output is 2; 000=(p+1)2 where p is the price she charges. At a price of 3, the elasticity of demand for the monopolist's output is: (a) 1. (b) 2:50. (c) 1:50. (d) 2. (e) 1.

C

The demand for a monopolist's output is 4; 000=(p+5)2 where p is the price she charges. At a price of 9, the elasticity of demand for the monopolist's output is: (a) 1. (b) 2:29. (c) 1:29. (d) 1:79. (e) 0:79.

C

A certain monopolist has a positive marginal cost of production. Despite this fact, the monopolist decides to produce a quantity of output that maximizes total revenues. Assume that the marginal revenue curve for this monopolist always has a negative slope. Then the monopolist: (a) is minimizing its prots. (b) produces the same output that it would if it maximized prots. (c) produces less output than it would if it maximized prots. (d) produces more output than it would if it were maximizing prots. (e) produces an output where marginal revenue is strictly less than 1.

D

A computer software rm has developed a new and better spreadsheet program. The pro- gram is protected by copyrights, so the rm can act as a monopolist for this product. The demand function for the spreadsheet is q = 50;000 100p. Any single consumer will want only one copy. The marginal cost of producing and distributing another copy and its documentation is just $10 per copy. If the company sells this software at the prot maximizing monopoly price, the number of consumers who would not buy the software at the monopoly price but would be willing to pay at least the marginal cost is: (a) 50,000. (b) 12,000. (c) 14,000. (d) 25,000. (e) None of the above.

D

A monopolist faces a constant marginal cost of $1 per unit. If at the price he is charging, the price elasticity of demand for the monopolist's output is :5; then: (a) the price he is charging must be 2. (b) the price he is charging must exceed 2. (c) the price he is charging must be less than 2. (d) the monopolist can not be maximizing prots. (e) the monopolist must use price discrimination.

D

A monopolist has constant marginal costs of $1 per unit. The demand for her output is 1000=p if p is less than or equal to 50. The demand is 0 if p > 50. What is her prot maximizing level of output? (a) 5 (b) 10 (c) 15 (d) 20 (e) 25

D

A monopolist has the total cost function, c(q) = 1; 300+ 7q. The inverse demand function is 110 2q; where prices and costs are measured in dollars. If the rm is required by law to meet demand at a price equal to its marginal cost: (a) the rm's prots will be zero. (b) the rm will lose $650. (c) the rm will make positive prot, but not as much prot as it would make if it were allowed to choose its own price. (d) the rm will lose $1,300 (e) the rm will lose $780

D

A monopolist has the total cost function, c(q) = 850 + 4q. The inverse demand function is 190 5q; where prices and costs are measured in dollars. If the rm is required by law to meet demand at a price equal to its marginal cost: (a) the rm's prots will be zero. (b) the rm will lose $425. (c) the rm will make positive prot, but not as much prot as it would make if it were allowed to choose its own price. (d) the rm will lose $850 (e) the rm will lose $510

D

A monopoly has the demand curve q = 10;000 100p. Its total cost function is c(q) = 1000+ 10q. The government plans to tax the monopoly's prots at a rate of 50%. If it does so: (a) the monopoly will increase its price by 50%. (b) the monopoly will increase its price by more than 50%. (c) the monopoly will recover some, but not all of the tax it pays by increasing its price. (d) the monopoly will not change its price or the quantity it sells. (e) none of the above.

D

A prot maximizing monopolist faces a downward sloping demand curve that has a constant elasticity of2. The rm nds it optimal to charge a price of 60 for its output. What is its marginal cost at this level of output? (a) 16 (b) 91 (c) 120 (d) 30 (e) 60

D

A prot maximizing monopolist faces a downward sloping demand curve that has a constant elasticity of4. The rm nds it optimal to charge a price of 60 for its output. What is its marginal cost at this level of output? (a) 23.50 (b) 136 (c) 120 (d) 45 (e) 60

D

An airline has exclusive landing rights at the local airport. The airline ies one ight per day to New York with a plane that has a seating capacity of 100. The cost of ying the plane per day is $4,000 +10q where q is the number of passengers. The number of ights to New York demanded is q = 165:5p. If the airline maximizes its monopoly prots, the dierence between the marginal cost of ying an extra passenger and the amount the marginal passenger is willing to pay to y to New York is: (a) $10. (b) $100. (c) $140. (d) $160. (e) None of the above.

D

An obscure inventor in Strasburg, North Dakota has a monopoly on a new beverage called Bubbles, which produces an unexplained craving for Lawrence Welk music. Bubbles is produced by the following process: Q = min(R=5;W) where R is pulverized Lawrence Welk records, and W is gallons of North Dakota well water. PR = PW = 1. Demand for Bubbles is Q = 2; 304P2A0:5. If the advertising budget for Bubbles is $81, the prot maximizing quantity of Bubbles is (a) 0 (b) 36 (c) 864 (d) 144 (e) 140

D

An obscure inventor in Strasburg, North Dakota has a monopoly on a new beverage called Bubbles, which produces an unexplained craving for Lawrence Welk music. Bubbles is produced by the following process: Q = min(R=5;W) where R is pulverized Lawrence Welk records, and W is gallons of North Dakota well water. PR = PW = 1. Demand for Bubbles is Q = 3; 600P2A0:5. If the advertising budget for Bubbles is $64, the prot maximizing quantity of Bubbles is (a) 0 (b) 40 (c) 1,200 (d) 200 (e) 196

D

In some parts of the world, Red Lizzard Wine is alleged to increase one's longevity. It is produced by the following process: Q = min((1=4)L;R) where L is the number of spotted red lizzards, and R is gallons of rice wine. PL = PR = 1. Demand for Red Lizzard Wine in the United States is Q = 1; 600P2A 1 2 . If the advertising budget is $100, the quantity of wine which should be imported into the US is (a) 0 (b) 40 (c) 800 (d) 160 (e) 156

D

In some parts of the world, Red Lizzard Wine is alleged to increase one's longevity. It is produced by the following process: Q = min((1=5)L;R) where L is the number of spotted red lizzards, and R is gallons of rice wine. PL = PR = 1. Demand for Red Lizzard Wine in the United States is Q = 576P2A 1 2 . If the advertising budget is $81, the quantity of wine which should be imported into the US is (a) 0 (b) 18 (c) 216 (d) 36 (e) 32

D

The Fabulous 500s Decor Company is the only producer of pink amingo lawn statues. While business is not a good as it used to be, in recent times the annual demand has been Q = 400 4P. Flamingo lawn statues are hand crafted by artisans using the process Q = min(L; P=9); where L is hours of labor, and P is pounds of pink plastic. PL = 20 and PP = 4. What would be the prot maximizing output and price? (a) Q = 180; P = 55 (b) Q = 189:78; P = 52:56 (c) Q = 199:44; P = 50:14 (d) Q = 88; P = 78 (e) Q = 176; P = 56

D

The Fabulous 500s Decor Company is the only producer of pink amingo lawn statues. While business is not a good as it used to be, in recent times the annual demand has been Q = 800 2P. Flamingo lawn statues are hand crafted by artisans using the process Q = min(L; P=6); where L is hours of labor, and P is pounds of pink plastic. PL = 15 and PP = 2. What would be the prot maximizing output and price? (a) Q = 393; P = 203:50 (b) Q = 392:33; P = 203:83 (c) Q = 399:42; P = 200:29 (d) Q = 373; P = 213:50 (e) Q = 746; P = 27

D

The demand curve facing a monopolist is D(p) = 100=p if p is 20 or smaller and D(p) = 0 if p > 20. The monopolist has a constant marginal cost of $1 per unit produced. What is the prot-maximizing quantity of output for this monopolist? (a) 4 (b) 3 (c) 2 (d) 5 (e) Cannot be determined.

D

The demand for a monopolist's output is 3; 000=(p + 1)2 where p is her price. She has constant marginal costs equal to $5 per unit. What price will she charge to maximize her prots? (a) 15 (b) 6 (c) 14 (d) 11 (e) 5

D

The demand for a monopolist's output is 6; 000=(p + 3)2 where p is her price. She has constant marginal costs equal to $5 per unit. What price will she charge to maximize her prots? (a) 20 (b) 8 (c) 17 (d) 13 (e) 5

D

The town council of Frostbite, Ontario is trying to decide whether to build an outdoor skating rink which would cost $1 million and last for only one season. Operating costs would be zero. Yearly passes would be sold to anyone who wanted to use the rink. If p is the price of the pass in dollars, the number demanded would be q = 1200:6p. The council has asked you to advise them on building the rink. You should tell them: (a) revenues won't cover construction costs at any ticket price. There is no way to increase total consumer surplus by building the rink. (b) if the rink is built and price is set to maximize prots, the town makes a prot and consumers will be better o. (c) if the rink is built and price set to maximize prots, the town makes a prot but consumers are worse o than without a rink. (d) there is no price at which ticket revenues still cover costs, but total consumer surplus from the rink exceeds costs. (e) None of the above.

D

A monopolist faces a downward-sloping demand curve and has xed costs so large that when he maximizes prots with a positive amount of output, he earns exactly zero prots. At this positive, prot-maximizing output, it must be that: (a) there are decreasing returns to scale. (b) demand is price inelastic. (c) marginal revenue is greater than marginal cost. (d) price equals marginal cost. (e) average total cost is greater than marginal cost.

E

A monopolist faces the inverse demand curve p = 192 4q. At what level of output is his total revenue maximized? (a) 36 (b) 34 (c) 12 (d) 48 (e) 24

E

A monopolist faces the inverse demand curve p = 288 6q. At what level of output is his total revenue maximized? (a) 36 (b) 34 (c) 12 (d) 48 (e) 24

E

A prot-maximizing monopolist sets: (a) price equal to average cost. (b) price equal to marginal cost. (c) price equal to marginal cost plus a pro-rated share of overhead. (d) price equal to marginal revenue. (e) marginal revenue equal to marginal cost.

E

In Problem 24.2, if the demand for pigeon pies is given by p(y) = 110 y=2; then the level of output that will maximize Peter's prots is (a) 114 (b) 22 (c) 220 (d) 330 (e) None of the other options are correct.

E

In Problem 24.2, if the demand for pigeon pies is given by p(y) = 110 y=4; then the level of output that will maximize Peter's prots is (a) 220 (b) 44 (c) 440 (d) 660 (e) None of the other options are correct.

E

In Problem 24.2, if the demand for pigeon pies is given by p(y) = 140 y=5; then the level of output that will maximize Peter's prots is (a) 354 (b) 70 (c) 700 (d) 1,050 (e) None of the other options are correct.

E

In Problem 24.2, if the demand for pigeon pies is given by p(y) = 70y=5; then the level of output that will maximize Peter's prots is (a) 179 (b) 35 (c) 350 (d) 525 (e) None of the other options are correct.

E

In Problem 24.2, if the demand for pigeon pies is given by p(y) = 90y=4; then the level of output that will maximize Peter's prots is (a) 184 (b) 36 (c) 360 (d) 540 (e) None of the other options are correct.

E

The demand for copies of the software package Macrosoft Doors is given by Q = 10; 000P16. The cost to produce Doors is C = 100; 000 + 10Q. If Macrosoft practices cost plus pricing, what would be the prot maximizing markup? (a) 100%. (b) 33.33%. (c) 14.29%. (d) 6.67%. (e) 3.23%.

E

The demand for copies of the software package Macrosoft Doors is given by Q = 10; 000P32. The cost to produce Doors is C = 100; 000+5Q. If Macrosoft practices cost plus pricing, what would be the prot maximizing markup? (a) 100%. (b) 33.33%. (c) 14.29%. (d) 6.67%. (e) 3.23%.

E