ECO 2023 Lecture Notes - Lecture 13: Marginal Revenue, Perfect Competition, Marginal Cost

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24 Nov 2017

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A patent or copyright is a barrier to entry based on: Government action to encourage and protect private research and development efforts. Municipalities commonly have only one provider of electricity. The price that a profit maximizing monopolist charges for its product is: Greater than the price that would prevail if the industry were perfectly competitive. For a purely competitive firm _______________; and for a uniform-price monopolist _______________ : P = mr = ar; p = ar > mr. Like a perfectly competitive firm, if a monopolist wants to know how much it will save by reducing output, it will evaluate its: In contrast to firms operating in purely competitive industries, demand curves faced by monopolists are: Suppose the demand for a monopolist"s good is described by the demand function p = 100 - 0. 5q. It follows that the monopolist"s total revenue function relating the total revenues (tr) to the quantity sold (q) is:

Related Questions

If a monopolist or a perfectly competitive firm is producing at a break-even point, then:
i. average revenue is equal to average variable cost
ii. average revenue is equal to average total cost
iii. total revenue is equal to total variable cost
iv. total revenue is equal to total cost

iii

i and iii

ii and iv

A natural monopoly, such as a local electricity provider, is the result of:
i. a firm owning or controlling a key input used in the production process
ii. economies of scale existing over a wide range of output
iii. long-run average total costs declining continuously as output increases
iv. long-run total costs declining continuously as output increases

What do economies of scale, the exclusive ownership of essential raw materials used in the production process, and patents have in common?

they are all barriers to entry

they all help explain why a monopolists demand and marginal revenue curves are identical

they must all be present before a monopolist may practice price discrimination

they all help explain why a firms short run average total cost curve is U-shaped

#10

The principle that a firm should produce up to the point where the marginal revenue (MR) from the sale of an extra unit of output is equal to the marginal cost (MC) of producing the extra unit applies:

to both perfectly competitive firms and monopolies

only to monopolies

only to perfectly competitive firms

only to firms that can employ discriminatory pricing strategies

#11

A monopoly is producing a level of output such that marginal revenue is equal to marginal cost. The firm is selling its output at a price of $8 per unit and is incurring average variable costs of $5 per unit and average total costs of $10 per unit. Given this information, it may be concluded that the firm:

is operating at maximum total profit

is operating at a loss that could be reduced by shutting down

is operating at a profit that could be increased by producing more output

is operating at a loss that is less than the loss incurred by shutting down

#12

Suppose the demand function for a profit maximizing monopolists good is P = 120 - 0.2Q, its total cost function is TC = 40 + 4Q + Q2, and its marginal cost function is MC = 4 + 2Q. If the firm uses a uniform pricing strategy, then rounded to the nearest unit of output and to the nearest dollar the firm will:

produce 48 units of output, charge a price of $110, and earn a total profit of $5280

produce 48 units of output, charge a price of $110, and earn a total profit of $2744

produce 52 units of output, charge a price of $134, and earn a total profit of $5322

produce 52 units of output, charge a price of $134, and earn a total profit of $4016

magentabuffalo597

A. A competitive firm

can consider only its location in setting the price.
must base its competitive price on product differentiation.
has the ability to set its own price.
must accept the price determined by the intersection of the market supply and demand curves.
has no supply curve.

B. If a firm is making an economic profit, then

the factors of production are being paid their opportunity costs.
there will be no change in the number of firms if the industry is perfectly competitive.
the factors of production are being paid less than their opportunity costs.
the factors of production are being paid more than their opportunity costs.
the firm will exit the industry

C. Along a downward-sloping monopoly demand curve,

marginal revenue is greater than price.
the elasticity of demand is constant.
marginal revenue decreases when the price decreases.
marginal revenue is equal to zero when the price is equal to zero

D. If, in the short run, a perfectly competitive firm is producing at a point where the total cost is greater than total revenue, then the firm should

shut down because economic profits are negative.
continue to produce as long as P > AVC.
continue to produce because accounting profits are positive.
set a higher price for its output.
set a lower price for its output

E. For a perfectly competitive firm, the demand curve is

the marginal revenue curve.
perfectly inelastic.
always equal to marginal cost.
the same as the market demand curve

F. A firm in a(n) industry will have the most elastic demand curve

monopolistic
oligopolistic
monopolistically competitive
perfectly competitive

G. If the demand curve of a monopolist is in the inelastic range, then

total revenue will fall if the price increases.
total revenue will be unchanged if the price increases.
total revenue will rise if the price increases.
the total supply will increase by an equal amount if demand increases.
the price will be unchanged if total revenue increases

H. Monopolistic competition and oligopoly are examples of

monopoly.
perfect competition.
theories of consumer behavior.
imperfect competition.
the extreme cases on the market structure continuum

I. Under which market structure do firms face the flattest (most elastic) demand curve?

perfect competition
monopolistic competition
oligopoly
monopoly

J. At the point of long-run equilibrium for a perfectly competitive firm,

economic profits are zero.
TR > TC.
TR < TC.
P = AVC.
normal profits are zero.

brownlouse308

Question 1

The four types of market structures we study in economics are perfect competition, monopolies, oligopolies, and corporations.

True

False

Question 2

Marginal costs will start to fall before average costs start to fall.

True

False

Question 3

A perfectly competitive industry is characterized by a few producers, all producers produce a homogeneous product, and there is free mobility of resources.

True

False

Question 4

One of the objectives of the monopolist is to squeeze out smaller competitors from the market.

True

False

Question 5

Unlike the perfect competitor, who is a price taker, the monopolist is facedwith a demand curve such that he/she can charge whatever price he/shewishes.

True

False

Question 6

A monopolist is different from a perfect competitor by the monopolist'sprice being equal to average revenue.

True

False

Question 7

Average fixed costs diminish continuously as output increases.

True

False

Question 8

The monopolist produces a product for which there are no close substitutegoods.

True

False

Question 9

Economies of scale is when the cost of producing a unit increases as itsoutput rate increases.

True

False

Question 10

The long-run average cost curve will be derived by adding up all the shortrun average total cost curves.

True

False

ECO 2023 Lecture Notes - Lecture 13: Marginal Revenue, Perfect Competition, Marginal Cost

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