04 Jun ion Monopoly 1. In the long run, a profit-maximizing monopoly produces an output volume that a. equates long-run marginal cost with marginal revenue. b. equates long-run average total cost with average revenue. c. assures permanent posit
Question
Monopoly
1. In the long run, a profit-maximizing monopoly produces an output volume that a. equates long-run marginal cost with marginal revenue. b. equates long-run average total cost with average revenue. c. assures permanent positive profit. d. is correctly described by both (a) and (c).
When answering questions 2-6, refer to the following graph about a monopoly firm:
2. Which of the following is true? a. Curve A indicates average total cost. b. Curve B indicates average total cost. c. Curve C indicates average fixes cost. d. Curve D indicates marginal cost.
3. To maximize profit, the firm should a. shut down at once. b. produce an output volume of 0d. c. produce an output volume of 0m. d. charge a price of su.
4. When it produces its profit-maximizing output volume, the firm’s a. price will be km. b. marginal revenue will be fi. c. total fixed cost will be gh multiplied by 0i. d. marginal cost will be xz.
5. When it produces its profit-maximizing output volume the firm’s a. average profit will be equal kl. b. average profit will equal bc. c. average revenue will equal ei. d. average revenue will equal np.
6. When it produces its profit-maximizing output volume, the firm’s a. output will equal 0r. b. total cost will equal lm multiplied by 0m. c. total cost will equal tu multiplied by 0u. d. total cost will equal vw multiplied by 0w.
ECON 3070 Intermediate Microeconomic Theory: Practice Multiple-Choice Questions 36
7. With respect to price elasticity, it is true that a. monopoly market demand need not be less elastic than market demand in a competitive industry. b. monopoly firms face less elastic demand than do competitive firms. c. a monopolist should not produce where demand is inelastic. d. all the above are correct statements.
8. A monopolist will maximize profit a. where total revenue is maximized. b. where the slope of the total revenue function equals the slope of the total cost function. c. where average cost is at a minimum. d. where all the above are true. e. somewhere other than the solutions listed because none of them is true.
9. In the figure below, for the demand curve shown, marginal revenue for the price reduction from a to b can be measured by a. adding x + y. b. subtracting x from y. c. measuring only x. d. subtracting y from x. e. none of the above.
10. If the LMC curve is below the MR curve at the point of output for a monopolist that is making profit, then the firm has a. too large a plant size. b. too small a plant size. c. insufficient knowledge about plant size until he knows his short-run marginal cost. d. insufficient knowledge about plant size until he knows his demand curve.
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