Monopoly 3701
32. For a monopoly firm, which of the following equalities is always true?
a. price = marginal revenue
b. price = average revenue
c. price = total revenue
d. marginal revenue = marginal cost
33. For a monopoly firm,
a. price always equals marginal revenue.
b. price always exceeds average revenue.
c. any price–quantity combination will maximize profits.
d. None of the above is correct.
3702 Monopoly
34. For a monopoly firm,
a. price always exceeds average revenue.
b. price always exceeds marginal revenue.
c. any price–quantity combination will maximize profits.
d. All of the above are correct.
35. Which of the following statements is correct for a monopolist?
(i) The firm maximizes profits by equating marginal revenue with marginal cost.
(ii) The firm maximizes profits by equating price with marginal cost.
(iii) Demand equals marginal revenue.
(iv) Average revenue equals price.
a. (i), (iii), and (iv) only
b. (i) and (iv) only
c. (i), (ii), and (iv) only
d. (i), (ii), (iii), and (iv)
Monopoly 3703
36. Which of the following statements is correct for both a monopolist and a perfectly competitive
firm?
(i) The firm maximizes profits by equating marginal revenue with marginal cost.
(ii) The firm maximizes profits by equating price with marginal cost.
(iii) Demand equals marginal revenue.
(iv) Average revenue equals price.
a. (i), (iii), and (iv) only
b. (i) and (iv) only
c. (i), (ii), and (iv) only
d. (i), (ii), (iii), and (iv)
37. Which of the following statements is true?
(i) When a competitive firm sells an additional unit of output, its revenue increases by an
amount less than the price.
(ii) When a monopoly firm sells an additional unit of output, its revenue increases by an
amount less than the price.
(iii) Average revenue is the same as price for both competitive and monopoly firms.
a. (ii) only
b. (iii) only
c. (i) and (ii) only
d. (ii) and (iii) only
3704 Monopoly
38. The marginal revenue curve for a monopoly firm starts at the same point on the vertical axis as
the
(i) average revenue curve.
(ii) marginal cost curve.
(iii) demand curve.
a. (i) only
b. (i) and (ii) only
c. (i) and (iii) only
d. (iii) only
39. For a monopoly,
a. average revenue exceeds marginal revenue.
b. average revenue equals marginal revenue.
c. average revenue is less than marginal revenue.
d. price equals marginal revenue.
Monopoly 3705
40. For a monopolist, when does marginal revenue exceed average revenue?
a. never
b. when output is less than the profit–maximizing level of output
c. when output is greater than the profit-maximizing level of output
d. for all levels of output greater than zero
41. Because a monopolist must lower its price in order to sell another unit of output,
a. marginal revenue is less than price.
b. long–term economic profits will be zero.
c. total revenue increases as price increases.
d. average revenue is less than price.
42. What is the shape of the monopolist’s marginal revenue curve?
a. a downward-sloping line that is identical to the demand curve
b. a downward-sloping line that lies below the demand curve
c. a horizontal line that is identical to the demand curve
d. a horizontal line that lies below the demand curve
3706 Monopoly
43. For a monopolist, marginal revenue is
a. equal to price, as it is for a perfectly competitive firm.
b. less than price, as it is for a perfectly competitive firm.
c. equal to price, whereas marginal revenue is less than price for a perfectly competitive firm.
d. less than price, whereas marginal revenue is equal to price for a perfectly competitive firm.
44. When a monopolist increases the number of units it sells, there are two effects on revenue. They
are the
a. demand effect and the supply effect.
b. competition effect and the cost effect.
c. competitive effect and the monopoly effect.
d. output effect and the price effect.
Monopoly 3707
45. For a monopolist, marginal revenue is
a. positive when the demand effect is greater than the supply effect.
b. positive when the monopoly effect is greater than the competitive effect.
c. negative when the price effect is greater than the output effect.
d. negative when the output effect is greater than the price effect.
46. The price effect describes the situation when a monopolist lowers the price of output and, all else
equal, total revenue
a. increases.
b. decreases.
c. is unchanged.
d. is maximized.
3708 Monopoly
47. The output effect describes the situation when a monopolist sells more output and, all else equal,
total revenue
a. increases.
b. decreases.
c. is unchanged.
d. is maximized.
48. For a monopolist, when the price effect is greater than the output effect, marginal revenue is
a. positive.
b. negative.
c. zero.
d. maximized.
Monopoly 3709
49. For a monopolist, when the output effect is greater than the price effect, marginal revenue is
a. positive.
b. negative.
c. zero.
d. maximized.
50. When a monopoly increases its output and sales,
a. both the output effect and the price effect work to increase total revenue.
b. the output effect works to increase total revenue, and the price effect works to decrease total
revenue.
c. the output effect works to decrease total revenue, and the price effect works to increase total
revenue.
d. both the output effect and the price effect work to decrease total revenue.
3710 Monopoly
51. Marginal revenue for a monopolist is computed as
a. average revenue divided by quantity sold.
b. average revenue times quantity divided by price.
c. total revenue divided by quantity sold.
d. change in total revenue per one unit increase in quantity sold.
52. Marginal revenue can become negative for
a. both competitive and monopoly firms.
b. competitive firms but not for monopoly firms.
c. monopoly firms but not for competitive firms.
d. neither competitive nor monopoly firms.
53. For a monopolist,
a. average revenue is always greater than the price of the good.
b. marginal revenue is always less than the price of the good.
c. marginal cost is always greater than average total cost.
d. marginal revenue equals marginal cost at the point where total revenue is maximized.
Monopoly 3711
54. If a monopoly lowers its price, its
a. total revenue must increase.
b. total revenue must decrease.
c. marginal revenue must increase.
d. marginal revenue must decrease.
55. With no price discrimination, the monopolist sells every unit at the same price. Therefore
a. marginal revenue is equal to price.
b. marginal revenue is equal to average revenue.
c. price is greater than marginal revenue.
d. Both a and b are correct.
3712 Monopoly
56. A monopolist can sell 300 units of output for $45 per unit. Alternatively, it can sell 301 units of
output for $44.60 per unit. The marginal revenue of the 301st unit of output is
a. –$120.00.
b. -$75.40.
c. –$0.40.
d. $75.40.
57. A monopoly firm can sell 150 units of output for $10 per unit. Alternatively, it can sell 151 units of
output for $9.90 per unit. The marginal revenue of the 151st unit of output is
a. –$5.10.
b. –$0.10.
c. $2.45.
d. $5.10.
Monopoly 3713
58. A monopoly firm can sell 150 units of output for $10 per unit. Alternatively, it can sell 151 units
of output for $9.98 per unit. The marginal revenue of the 151st unit of output is
a. –$6.98.
b. –$0.02.
c. $2.45.
d. $6.98.
59. When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at
$10 it sells 60 units. The marginal revenue for the firm over this range is
a. $11.
b. $22.
c. $33.
d. $44.
3714 Monopoly
60. When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at
$10 it sells 62 units. The marginal revenue for the firm over this range is
a. $22.
b. $27.
c. $54.
d. $108.
61. When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at
$9 it sells 62 units. The marginal revenue for the firm over this range is
a. $18.
b. $23.
c. $46.
d. $92.
Monopoly 3715
62. If a monopolist can sell 7 units when the price is $4 and 8 units when the price is $3, then the
marginal revenue of selling the eighth unit is equal to
a. $3.
b. $4.
c. $24.
d. –$4.
63. If the monopolist’s linear demand curve intersects the quantity axis at Q = 30, then the
monopolist’s marginal
revenue will be equal to zero at a. Q = 10.
b. Q = 15. c. Q = 20. d. Q = 30.
64. Bob’s Butcher Shop is the only place within 100 miles that sells bison burgers. Assuming that Bob
is maximizing his profit, which of the following statements is true?
a. The price of Bob’s bison burgers will be less than Bob’s marginal cost.
b. The price of Bob’s bison burgers will exceed Bob’s marginal cost.
c. The price of Bob’s bison burgers will equal Bob’s marginal cost.
d. Costs are irrelevant to Bob because he is a monopolist.
3716 Monopoly
NOTES: r
65. If a monopolist‘s marginal costs increase by $1 for all levels of output, then the monopoly price
will
a. rise by $1.
b. rise by more than $1.
c. rise by less than $1.
d. not change, but profits will decrease.
66. If a monopolist has zero marginal costs, it will produce
a. the output at which total revenue is maximized.
b. in the range in which marginal revenue is still increasing.
c. at the point at which marginal revenue is at a maximum.
d. in the range in which marginal revenue is negative.
Monopoly 3717
67. Which statement best describes the effect(s) that occur when a monopoly firm reduces the price
of its product?
a. The “price effect” causes total revenue to fall.
b. The “output effect” causes total revenue to rise.
c. The “revenue effect” causes total revenue to remain constant.
d. Both a and b are correct.
Figure 15-3
68. Refer to Figure 15-3. Which of the following statements is correct?
a. Panel C represents the typical demand curve for a perfectly competitive firm, and Panel B
represents the typical demand curve for a monopoly.
b. Panel B represents the typical demand curve for a perfectly competitive firm, and Panel A
represents the typical demand curve for a monopoly.
c. Panel A represents the typical demand curve for a perfectly competitive firm, and Panel C
represents the typical demand curve for a monopoly.
d. Panel C represents the typical demand curve for a perfectly competitive firm, and Panel D
represents the typical demand curve for a monopoly.
3718 Monopoly
69. Refer to Figure 15-3. Which of the following statements is correct?
a. Panel B represents the typical demand curve for a perfectly competitive firm.
b. Panel A represents the typical demand curve for a monopoly.
c. Panel A represents the typical demand curve for a perfectly competitive industry.
d. All of the above are correct.
70. Refer to Figure 15-3. Which of the following statements is correct?
a. Panel B represents the typical demand curve for a perfectly competitive industry.
b. Panel A represents the typical demand curve for a monopoly.
c. Panel C represents the typical demand curve for a perfectly competitive firm.
d. All of the above are correct.
Monopoly 3719
71. Refer to Figure 15-3. Which panel could represent the demand curve facing a soybean farmer?
a. Panel A
b. Panel B
c. Panel C
d. Panel D
72. Refer to Figure 15-3. Which panel could represent the demand curve facing the soybean
industry?
a. Panel A
b. Panel B
c. Panel C
d. Panel D
3720 Monopoly
73. Refer to Figure 15-3. Which panel could represent the demand curve facing a local cable
television provider if that firm in a monopolist?
a. Panel A
b. Panel B
c. Panel C
d. Panel D
Figure 15-4