Question ____ 41. Figure 16-1.The figure is drawn for a monopolistically competitive

____ 41. Figure 16-1.The figure is drawn for a monopolistically competitive firm.

MR

Demand

MC

18

12

4 8 12 16 20 24 28 32 Q

8

16

24

32

P

Refer to Figure 16-1.The firm’s profit-maximizing level of output is

a. 8 units. c. 16 units.

b. 12 units. d. 24 units.

____ 42. Figure 16-6

Refer to Figure 16-6. The firm depicted in panel b faces a horizontal demand curve. If panel b depicts a profit-maximizing firm,

a. it could be operating in either a perfectly competitive market or in a monopolistically competitive

market.

b. it would not have excess capacity in its production as long as it is earning zero economic profit.

c. it is able to choose the price at which it sells its product.

d. the firm can always raise its profit by increasing production since consumers will buy as much as

the firm can produce.

____ 43. Which of the following statements is correct?

a. If duopolists successfully collude, then their combined output will be equal to the output that

would be observed if the market were a monopoly.

b. Although the logic of self-interest decreases a duopoly’s price below the monopoly price, it does

not push the duopolists to reach the competitive price.

c. Although the logic of self-interest increases a duopoly’s level of output above the monopoly level,

it does not push the duopolists to reach the competitive level.

d. All of the above are correct.

____ 44. Table 17-4.The information in the table below shows the total demand for high-speed Internet subscriptions in a

small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of

$200,000 (per year) and that the marginal cost of providing an additional subscription is always $80.

Quantity Price (per year)

0 $320

2,000 $280

4,000 $240

6,000 $200

8,000 $160

10,000 $120

12,000 $ 80

14,000 $ 40

16,000 $ 0

Refer to Table 17-4. Suppose there is only one high-speed Internet service provider in this market and it seeks to maximize its profit. The company will

a. sell 6,000 subscriptions and charge a price of $200 for each subscription.

b. sell 8,000 subscriptions and charge a price of $160 for each subscription.

c. sell 10,000 subscriptions and charge a price of $120 for each subscription.

d. sell 12,000 subscriptions and charge a price of $80 for each subscription.

____ 45. Refer to Table 17-4. Assume there are two high-speed Internet service providers that operate in this market. If they are able to collude on the quantity of subscriptions that will be sold and on the price that will be charged for subscriptions, then their agreement will stipulate that

a. each firm will charge a price of $120 and each firm will sell 5,000 subscriptions.

b. each firm will charge a price of $160 and each firm will sell 4,000 subscriptions.

c. each firm will charge a price of $100 and each firm will sell 3,000 subscriptions.

d. each firm will charge a price of $200 and each firm will sell 3,000 subscriptions.

____ 46. Refer to Table 17-4. Assume there are two profit-maximizing high-speed Internet service providers operating in this market. Further assume that they are able to collude on the quantity of subscriptions that will be sold and on the price that will be charged for subscriptions. How much profit will each company earn?

a. $80,000 c. $160,000

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