Chapter 15/Monopoly ❖ 21
26. A monopolist’s average revenue is always
a.
equal to marginal revenue.
b.
greater than the price of its product.
c.
equal to the price of its product.
d.
less than the price of its product.
27. If a profit-maximizing monopolist faces a downward-sloping market demand curve, its
a.
average revenue is less than the price of the product.
b.
average revenue is less than marginal revenue.
c.
marginal revenue is less than the price of the product.
d.
marginal revenue is greater than the price of the product.
28. When a monopolist increases the amount of output that it produces and sells, average revenue
a.
increases, and marginal revenue increases.
b.
increases, and marginal revenue decreases.
c.
decreases, and marginal revenue increases.
d.
decreases, and marginal revenue decreases.
29. 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
30. 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)
22 ❖ Chapter 15/Monopoly
31. 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)
32. 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
33. 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
34. 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.
35. 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
Chapter 15/Monopoly ❖ 23
36. 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.
37. 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
38. 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.
39. 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.
40. 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.
41. For a monopolist, when the price effect is greater than the output effect, marginal revenue is
a.
positive.
b.
negative.
c.
zero.
d.
maximized.
24 ❖ Chapter 15/Monopoly
42. For a monopolist, when the output effect is greater than the price effect, marginal revenue is
a.
positive.
b.
negative.
c.
zero.
d.
maximized.
43. 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.
44. 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.
45. 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.
46. 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.
47. 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.
Chapter 15/Monopoly ❖ 25
48. 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.
49. A monopolist can sell 200 units of output for $36 per unit. Alternatively, it can sell 201 units of output for
$35.80 per unit. The marginal revenue of the 201st unit of output is
a.
$-4.20.
b.
$-0.20.
c.
$4.20.
d.
$35.80.
50. A monopoly firm can sell 150 units of output for $10 per unit. Alternatively, it can sell 151 units of output for
$9.95 per unit. The marginal revenue of the 151st unit of output is
a.
$-2.45.
b.
$-0.05.
c.
$2.45.
d.
$9.95.
51. 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.
52. If a monopolist can sell 7 units when the price is $4 and 8 units when the price is $3, then marginal revenue of
selling the eighth unit is equal to
a.
$3.
b.
$4.
c.
$24.
d.
–$4.
26 ❖ Chapter 15/Monopoly
53. 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.
54. Angelo is a wholesale meatball distributor. He sells his meatballs to all the finest Italian restaurants in town.
Nobody can make meatballs like Angelo. As a result, his is the only business in town that sells meatballs to
restaurants. Assuming that Angelo is maximizing his profit, which of the following statements is true?
a.
Meatball prices will be less than marginal cost.
b.
Meatball prices will equal marginal cost.
c.
Meatball prices will exceed marginal cost.
d.
Costs are irrelevant to Angelo because he is a monopolist.
55. 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.
56. 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.
Chapter 15/Monopoly ❖ 27
Figure 15-2
D
Panel A
Quantity
Price
D
Panel B
Quantity
Price
D
Panel C
Quantity
Price
D
Panel D
Quantity
Price
57. Refer to Figure 15-2. 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 C
represents the typical demand curve for a monopoly.
c.
Panel A represents the typical demand curve for a perfectly competitive firm, and Panel B
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.
58. Refer to Figure 15-2. Which of the following statements is correct?
a.
Panel C represents the typical demand curve for a perfectly competitive firm.
b.
Panel B represents the typical demand curve for a monopoly.
c.
Panel B represents the typical demand curve for a perfectly competitive industry.
d.
All of the above are correct.
59. Refer to Figure 15-2. Which of the following statements is correct?
a.
Panel C represents the typical demand curve for a perfectly competitive industry.
b.
Panel B represents the typical demand curve for a monopoly.
c.
Panel B represents the typical demand curve for a perfectly competitive firm.
d.
All of the above are correct.
60. Refer to Figure 15-2. Which panel could represent the demand curve facing a soybean farmer?
a.
Panel A
b.
Panel B
c.
Panel C
d.
Panel D
28 ❖ Chapter 15/Monopoly
61. Refer to Figure 15-2. Which panel could represent the demand curve facing the soybean industry?
a.
Panel A
b.
Panel B
c.
Panel C
d.
Panel D
62. Refer to Figure 15-2. 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 15-3
Curve B Curve A
Curve D
Curve C
Q4Q2 Q3
P1
P2
P4
P3
P0
Q0
Q1
Quantity
Price
63. Refer to Figure 15-3. The demand curve for a monopoly firm is depicted by curve
a.
A.
b.
B.
c.
C.
d.
D.
64. Refer to Figure 15-3. The marginal revenue curve for a monopoly firm is depicted by curve
a.
A.
b.
B.
c.
C.
d.
D.
Chapter 15/Monopoly ❖ 29
65. Refer to Figure 15-3. The marginal cost curve for a monopoly firm is depicted by curve
a.
A.
b.
B.
c.
C.
d.
D.
66. Refer to Figure 15-3. The average total cost curve for a monopoly firm is depicted by curve
a.
A.
b.
B.
c.
C.
d.
D.
67. Refer to Figure 15-3. If the monopoly firm is currently producing Q3 units of output, then a decrease in out-
put will necessarily cause profit to
a.
remain unchanged.
b.
decrease.
c.
increase as long as the new level of output is at least Q2.
d.
increase as long as the new level of output is at least Q1.
68. Refer to Figure 15-3. Profit can always be increased by increasing the level of output by one unit if the mo-
nopolist is currently operating at
(i)
Q0.
(ii)
Q1.
(iii)
Q2.
(iv)
Q3.
a.
(ii) only
b.
(i) or (ii) only
c.
(i) only
d.
(i), (ii), or (iii) only
69. Refer to Figure 15-3. If the monopoly firm wants to maximize its profit, it should operate at a level of output
equal to
a.
Q1.
b.
Q2.
c.
Q3.
d.
Q4.
30 ❖ Chapter 15/Monopoly
70. Refer to Figure 15-3. Profit will be maximized by charging a price equal to
a.
P1.
b.
P2.
c.
P3.
d.
P4.
71. Refer to Figure 15-3. A profit-maximizing monopoly’s total revenue is equal to
a.
P4 x Q2.
b.
P3 x Q4.
c.
(P4-P2) x Q2.
d.
(P4-P3) x Q2.
Figure 15-4
Curve B Curve A
Curve D
Curve C
Q3
P4
P2
Q4
P3
Q1
P0
P1
Q2
P5
Quantity
Price
72. Refer to Figure 15-4. A profit-maximizing monopoly will produce an output level of
a.
Q1.
b.
Q2.
c.
Q3.
d.
Q4.
Chapter 15/Monopoly ❖ 31
73. Refer to Figure 15-4. A profit-maximizing monopoly will charge a price of
a.
P5.
b.
P4.
c.
P3.
d.
P2.
74. Refer to Figure 15-4. A profit-maximizing monopoly’s total revenue is equal to
a.
P4 x Q3.
b.
P5 x Q1.
c.
P3 x Q4.
d.
(P4-P2) x Q3.
75. Refer to Figure 15-4. A profit-maximizing monopoly’s total cost is equal to
a.
P4 x Q3.
b.
P2 x Q3.
c.
P1 x Q3.
d.
(P4-P1) x Q3.
76. Refer to Figure 15-4. A profit-maximizing monopoly’s profit is equal to
a.
P4 x Q3.
b.
(P4-P2) x Q3.
c.
(P4-P1) x Q3.
d.
(P5-P0) x Q1.
77. Refer to Figure 15-4. Profit on a typical unit sold for a profit-maximizing monopoly would equal
a.
P5-P0.
b.
P4-P2.
c.
P4-P1.
d.
P4-P3.
78. Refer to Figure 15-4. At the profit-maximizing level of output,
a.
marginal revenue is equal to P3.
b.
marginal cost is equal to P3.
c.
average revenue is equal to P4.
d.
average total cost is equal to P0.
32 ❖ Chapter 15/Monopoly
Figure 15-5
MC
D
MR
ATC
J K L
A
B
C
F
G
H
O
P
Quantity
Price
79. Refer to Figure 15-5. What price will the monopolist charge?
a.
A
b.
B
c.
C
d.
F
80. Refer to Figure 15-5. How much output will the monopolist produce?
a.
O
b.
J
c.
K
d.
L
81. Refer to Figure 15-5. What area measures the monopolist’s profit?
a.
(B-F)*K
b.
(A-H)*J
c.
(B-G)*K
d.
0.5[(B-F)*(L-K)]
Chapter 15/Monopoly ❖ 33
Figure 15-6
MC
D
MR
ATC
912 15
23
20
15
12
10
9
0
30
Quantity
Price
82. Refer to Figure 15-6. In order to maximize profits, the monopolist should produce
a.
9 units.
b.
12 units.
c.
15 units.
d.
more than 15 units.
83. Refer to Figure 15-6. In order to maximize profits, the monopolist should charge a price of
a.
$9.
b.
$12.
c.
$20.
d.
$23.
84. Refer to Figure 15-6. A profit-maximizing monopolist would earn total revenues of
a.
$81.
b.
$144.
c.
$225.
d.
$240.
85. Refer to Figure 15-6. A profit-maximizing monopolist would incur total costs of
a.
$81.
b.
$120.
c.
$144.
d.
$240.
34 ❖ Chapter 15/Monopoly
86. Refer to Figure 15-6. A profit-maximizing monopolist would earn profits of
a.
$96.
b.
$117.
c.
$120.
d.
$126.
Table 15-1
Quantity
Price
Total
Revenue
Average
Revenue
Marginal
Revenue
1
$35
$35
2
$64
$32
$29
3
$29
4
$17
5
$23
$11
6
$120
7
$17
$-1
8
$-7
9
$99
$11
$-13
10
$80
$8
87. Refer to Table 15-1. If the monopolist sells 8 units of its product, how much total revenue will it receive from
the sale?
a.
$14
b.
$40
c.
$112
d.
$164
88. Refer to Table 15-1. If the monopolist wants to maximize its revenue, how many units of its product should it
sell?
a.
4
b.
5
c.
6
d.
8
89. Refer to Table 15-1. When 4 units of output are produced and sold, what is average revenue?
a.
$17
b.
$21
c.
$23
d.
$26
Chapter 15/Monopoly ❖ 35
90. Refer to Table 15-1. What is the marginal revenue for the monopolist for the sixth unit sold?
a.
$3
b.
$5
c.
$11
d.
$17
91. Refer to Table 15-1. Assume this monopolist’s marginal cost is constant at $12. What quantity of output (Q)
will it produce and what price (P) will it charge?
a.
Q = 4, P = $29
b.
Q = 4, P = $26
c.
Q = 5, P = $23
d.
Q = 7, P = $17
Table 15-2
Tanya has the following demand curve for selling taffy. Assume that Tanya has a marginal cost of $3 per unit.
Price
Quantity
$10
1
$8
2
$6
3
$4
4
$2
5
92. Refer to Table 15-2. What is Tanya’s profit-maximizing level of output?
a.
1
b.
2
c.
3
d.
4
93. Refer to Table 15-2. What is Tanya’s profit-maximizing price?
a.
$2
b.
$4
c.
$6
d.
$8
36 ❖ Chapter 15/Monopoly
Table 15-3
Consider the following demand and cost information for a monopoly.
Quantity
Price
Total Cost
0
$30
$3
1
$25
$7
2
$20
$12
3
$15
$18
4
$10
$25
94. Refer to Table 15-3. The marginal revenue of the 2nd unit is
a.
$10.
b.
$15.
c.
$20.
d.
$25.
95. Refer to Table 15-3. The marginal cost of the 4th unit is
a.
$7.
b.
$12.
c.
$25.
d.
$60.
96. Refer to Table 15-3. The maximum profit this monopolist can earn is
a.
$5.
b.
$15.
c.
$16.
d.
$28.
97. Refer to Table 15-3. To maximize profit, the monopolist sets price at
a.
$10.
b.
$15.
c.
$20.
d.
$25.
Chapter 15/Monopoly ❖ 37
Table 15-4
A monopolist faces the following demand curve:
Price
Quantity
$30
0
$25
2.5
$20
5
$15
7.5
$10
10
$5
12.5
$0
15
98. Refer to Table 15-4. If the monopolist produces 10 units, what is its average revenue?
a.
$100
b.
$15
c.
$10
d.
$1
99. Refer to Table 15-4. If the monopolist produces 5 units, what is its average revenue?
a.
$100
b.
$20
c.
$5
d.
$4
100. Refer to Table 15-4. If the monopolist produces 10 units, what is its marginal revenue?
a.
$12.50
b.
$5
c.
–$5
d.
-$12.50
101. Refer to Table 15-4. If the monopolist produces 5 units, what is its marginal revenue?
a.
$100
b.
$37.5
c.
$15
d.
$2.50
102. Refer to Table 15-4. The monopolist will not produce
a.
5 units or fewer under any circumstances.
b.
7.5 units or fewer under any circumstances.
c.
7.5 units or more under any circumstances.
d.
10 units or more under any circumstances.
38 ❖ Chapter 15/Monopoly
103. Refer to Table 15-4. In order to maximize total revenues, the monopolist should produce
a.
5 units.
b.
7.5 units.
c.
10 units.
d.
12.5 units.
104. Refer to Table 15-4. In order to maximize profits, the monopolist should produce
a.
7.5 units.
b.
10 units.
c.
where marginal revenue equals marginal cost.
d.
Both a) and c) are correct.
Table 15-5
A monopolist faces the following demand curve:
Price
Quantity
$51
1
$47
2
$42
3
$36
4
$29
5
$21
6
$12
7
105. Refer to Table 15-5. The monopolist has total fixed costs of $60 and has a constant marginal cost
of $15. What is the profit-maximizing level of production?
a.
2 units
b.
3 units
c.
4 units
d.
5 units
106. Refer to Table 15-5. The monopolist has total fixed costs of $60 and has a constant marginal cost of $15.
What is the profit-maximizing price?
a.
$4
b.
$39
c.
$36
d.
$42
Chapter 15/Monopoly ❖ 39
Table 15-6
A monopolist faces the following demand curve:
Quantity
Price
1
$15
2
$12
3
$9
4
$6
5
$3
107. Refer to Table 15–6. What is the marginal revenue from the sale of the 2nd unit?
a.
$–3
b.
$3
c.
$9
d.
$24
108. Refer to Table 15–6. What is the marginal revenue from the sale of the 3rd unit?
a.
$–3
b.
$3
c.
$9
d.
$24
109. Refer to Table 15–6. What is the marginal revenue from the sale of the 4th unit?
a.
$–3
b.
$3
c.
$9
d.
$24
110. Refer to Table 15–6. If the monopolist has a constant marginal cost for her product equal to $7, what is her
profit-maximizing price?
a.
$6
b.
$9
c.
$12
d.
$15
111. Refer to Table 15–6. Suppose the monopolist has total fixed costs equal to $5 and a variable cost equal to $4
per unit for all units produced. What is the profit-maximizing price?
a.
$6
b.
$9
c.
$12
d.
$15
40 ❖ Chapter 15/Monopoly
112. Refer to Table 15–6. Suppose the monopolist has total fixed costs equal to $5 and a variable cost equal to $4
per unit for all units produced. What is the total profit if she operates at her profit-maximizing price?
a.
$1
b.
$7
c.
$9
d.
$11
113. Refer to Table 15–6. Suppose the monopolist has total fixed costs equal to $5 and a variable cost equal to $4
per unit for all units produced. What would the total profit be if she charged $6 per unit for her product?
a.
$1
b.
$3
c.
$8
d.
$15
Table 15-7
Sally owns the only shoe store in town. She has the following cost and revenue information.
COSTS
REVENUES
Quantity
Produced
(pairs)
Total Cost
($)
Marginal
Cost
Quantity
Demanded
Price
($/unit)
Total
Revenue
Marginal
Revenue
0
100
—
0
170
—
1
140
1
160
2
184
2
150
3
230
3
140
4
280
4
130
5
335
5
120
6
395
6
110
7
475
7
100
8
565
8
90
114. Refer to Table 15-7. What is the marginal cost of the 6th pair of shoes?
a.
$44
b.
$46
c.
$55
d.
$60
115. Refer to Table 15-7. What is the marginal cost of the 8th pair of shoes?
a.
$50
b.
$60
c.
$90
d.
$110