06 May uestion13.The following table provides information on the price, quantity, and average cost for a
uestion
13.The following table provides information on the price, quantity, and average cost for a
monopoly. At what price will the firm maximize its profit?
Price Output ATC
$5 0 ??
$4 4 $1.00
$3 8 $0.75
$2 12 $0.75
$1 16 $0.81
$0 20 $0.90
a.$1
b.$2
c.$3
d.$4
14George and Jerry are competitors in a local market. Each is trying to decide if it is better to advertise on TV, on radio, or not at all. If they both advertise on TV, each will earn a profit of $3,000. If they both advertise on radio, each will earn a profit of $5,000. If neither advertises at all, each will earn a profit of $10,000. If one advertises on TV and the other advertises on radio, then the one advertising on TV will earn $4,000 and the other will earn $2,000. If one advertises on TV and the other does not advertise, then the one advertising on TV will earn $8,000 and the other will earn $5,000. If one advertises on radio and the other does not advertise, then the one advertising on radio will earn $9,000 and the other will earn $6,000. If both follow their dominant strategy, then George will
a.advertise on TV and earn $3,000.
b.advertise on radio and earn $5,000.
c.advertise on TV and earn $8,000.
d.not advertise and earn $10,000.
Table 1.The information in the table below shows the total demand for premium?channel
digital cable TV subscriptions in a small urban market. Assume that each digital cable TV
operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the
market area and that the marginal cost of providing the premium channel service to a
household is zero.
Quantity Price (per year)
0 $180
3,000 $150
6,000 $120
9,000 $ 90
12,000 $ 60
15,000 $ 30
18,000 $ 0
15.Refer to Table 1. Assume there are two profit?maximizing digital cable TV companies operating in this market. Further assume that they are not able to collude on the price and quantity of premium digital channel subscriptions to sell. What price will premium digital channel cable TV subscriptions be sold at when this market reaches a Nash equilibrium?
a.$30
b.$60
c.$90
d.$120
16.Refer to Table 1. Assume there are two profit?maximizing digital cable TV companies
operating in this market. Further assume that they are not able to collude on the price and
quantity of premium digital channel subscriptions to sell. How many premium digital channel cable TV subscriptions will be sold altogether when this market reaches a Nash equilibrium?
a.6,000
b.9,000
c.12,000
d.15,000
17.Refer to Table 1. Assume that there are two profit?maximizing digital cable TV companies operating in this market. Further assume that they are not able to collude on the price and quantity of premium digital channel subscriptions to sell. How much profit will each firm earn when this market reaches a Nash equilibrium?
a.$25,000
b.$90,000
c.$160,000
d.$215,000
18.A monopolist
a.has a supply curve that is upward?sloping, just like a competitive firm.
b.does not have a supply curve because the monopolist sets its price at the same
time it chooses the quantity to supply.
c.has a horizontal supply curve, just like a competitive firm.
d.does not have a supply curve because marginal revenue exceeds the price it
charges for its products.
19.One advantage of allowing a market for pollution permits to control the total amount of
pollution released in an area is that
a.the government knows exactly how much each firm is allowed to pollute.
b.government revenue from the sale of permits is greater than revenue from a
Pigovian tax.
c.the initial allocation of permits to firms does not affect the efficiency of the
market.
d.firms will work together to eventually eliminate pollution.
20.Suppose when a monopolist produces 75 units its average revenue is $10 per unit, its marginal revenue is $5 per unit, its marginal cost is $6 per unit, and its average total cost is $5 per unit. What can we conclude about this monopolist?
a.The monopolist is currently maximizing profits, and its total profits are $375.
b.The monopolist is currently maximizing profits, and its total profits are $300.
c.The monopolist is not currently maximizing profits; it should produce more units
and charge a lower price to maximize profits.
d.The monopolist is not currently maximizing profits; it should produce fewer units
and charge a higher price to maximize profits.
21.In a competitive market with identical firms,
a.an increase in demand in the short run will result in a new price above the
minimum of average total cost, allowing firms to earn a positive economic profit
in both the short run and the long run.
b.firms cannot earn positive economic profit in either the short run or long run.
c.firms can earn positive economic profit in the long run if the long?run market
supply curve is upward sloping.
d.free entry and exit into the market requires that firms earn zero economic profit
in the long run even though they may be able to earn positive economic profit in
the short run.
22.The supply curve of a perfect competitor in the short run is:
a.Marginal revenue curve.
b.Marginal cost curve.
c.Average revenue curve
d.Marginal cost curve above its average variable cost curve
23.A monopolistically competitive firm faces a demand curve, P=20?Q, and earns zero profit. The firm produces at a constant marginal cost of 2. What is the fixed cost for this firm?
a.18
b.64
c.81
d.Cannot be determined from the information given.
24.At 47 units of labor, a firm finds that average product of labor equals 39.6 and marginal product of labor equals 32.9. We can conclude that the average product curve at 47 units of labor is:
a.upward?sloping.
b.horizontal.
c.vertical.
d.downward?sloping.
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