Answer the following questions pertaining to monopolist production.
1) If a monopolist is producing in the inelastic portion of its demand curve, which of the following will occur if the monopolist decreases its price?
a. Marginal revenue will decrease, but profits will increase.
b. Marginal revenue will increase, but profits will decrease.
c.Total revenue will decrease, but profits will increase.
d.Both total revenue and profits will decrease.
e. Both total revenue and profits will increase.
2) Which of the following statements is true for a perfectly competitive firm but not true for a monopoly?
a.The firm's price is equal to its average revenue.
b.The firm cannot affect the market price for its good.
c.It is difficult for other firms to enter the industry.
d. The demand for the firm's product is unit elastic.
e.The firm must lower its price in order to sell more of its product.
3) Monopolies are inefficient for which of the following reasons?
a. They produce too little of the good.
b.They produce too much of the good.
c. They do not produce an output level at which marginal cost equals marginal revenue.
d. The marginal cost of producing the good is too low.
e. The firm is too large.
4) Which of the following is necessarily true of the profit-maximizing equilibrium of a monopolist who sets a single price?
a. Price equals average total cost.
b. Price is greater than the marginal cost.
c. Average total cost is at its minimum level.
d. Marginal revenue is greater than marginal cost.
e. Marginal cost is minimized.
Answer the following questions pertaining to monopolist production.
1) If a monopolist is producing in the inelastic portion of its demand curve, which of the following will occur if the monopolist decreases its price?
a. Marginal revenue will decrease, but profits will increase.
b. Marginal revenue will increase, but profits will decrease.
c.Total revenue will decrease, but profits will increase.
d.Both total revenue and profits will decrease.
e. Both total revenue and profits will increase.
2) Which of the following statements is true for a perfectly competitive firm but not true for a monopoly?
a.The firm's price is equal to its average revenue.
b.The firm cannot affect the market price for its good.
c.It is difficult for other firms to enter the industry.
d. The demand for the firm's product is unit elastic.
e.The firm must lower its price in order to sell more of its product.
3) Monopolies are inefficient for which of the following reasons?
a. They produce too little of the good.
b.They produce too much of the good.
c. They do not produce an output level at which marginal cost equals marginal revenue.
d. The marginal cost of producing the good is too low.
e. The firm is too large.
4) Which of the following is necessarily true of the profit-maximizing equilibrium of a monopolist who sets a single price?
a. Price equals average total cost.
b. Price is greater than the marginal cost.
c. Average total cost is at its minimum level.
d. Marginal revenue is greater than marginal cost.
e. Marginal cost is minimized.
