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550 Miller Economics Today, 16th Edition
11) In the above figure, the total cost of producing the profit maximizing level of output is shown by
rectangle
A) 0P1AQ1. B) 0P5EQ5. C) 0P4HQ4. D) 0P2BQ1.
12) In the above figure, suppose the monopolist is producing at Q3. The firm should
A) increase output and decrease price. B) decrease output and increase price.
C) not change output or price. D) shut down.
13) In the above figure, if the firm is producing at Q3and charging a price of P3
,
it should
A) increase output and decrease price. B) decrease output and increase price.
C) not change output or price. D) shut down.
14) In the above figure, if the firm is producing Q1units at a price P1
,
the firm should
A) increase output and decrease price. B) decrease output and increase price.
C) not change output or price. D) shut down.
15) In the above figure, if the firm is producing Q2units at a price P2
,
it should
A) increase output and decrease price. B) decrease output and increase price.
C) not change output or price. D) shut down.
16) Which of the following statements concerning a monopolist is FALSE?
A) A monopolist will produce at which MR MC.
B) For a monopolist, marginal revenue is less than price.
C) A monopolist will charge the highest price at which any individual will purchase the
product.
D) A monopolist will shut down if price is less than average variable cost.
17) As a price searcher, a monopoly firm
A) must only determine the price it charges.
B) must determine its optimal price output combination.
C) must determine its output level and then accept the market price for its product.
D) must determine the prices it pays for its inputs and accept the market price for its output.
18) In the above figure, the monopolist s profit maximizing output level is
A) A. B) B. C) C. D) D.
19) In the above figure, the monopolist s profit maximizing price is
A) A. B) B. C) C. D) D.
20) Suppose a monopolist sells 10,000 units of output at $22 per unit. The firm s total revenue is
A) $2,200. B) $22,000. C) $220,000. D) $2,200,000.
21) The price output combination that maximizes profits for a monopolist occurs at the point where
A) total revenues and total costs are equal.
B) the difference between total revenues and total costs is the greatest.
C) total revenues are the greatest.
D) the elasticity of demand equals one.
22) A monopolist finds the price output combination that maximizes its profits by
A) equating total revenue and total cost.
B) equating marginal revenue and marginal cost.
C) finding the combination for which the difference between marginal revenue and marginal
cost is the greatest.
D) equating price and marginal cost.
23) In equilibrium, which of the following conditions is common to both unregulated monopoly
and pure competition?
A) P MR B) AR ATC C) MR MC D) MC P
24) Profits can be maximized by equating MR MC Price,
A) only in perfectly competitive markets.
B) only in monopoly markets.
C) only in discriminating monopoly markets.
D) only with government price controls.
25) In maximizing economic profit, the monopolist will
A) choose the highest price that still permits some output sales.
B) equate marginal cost to minimum average total cost.
C) equate price to marginal cost.
D) equate marginal revenue to marginal cost.
26) The monopolist faces a downward sloping demand curve, and maximizing profits requires the
monopolist to
A) accept the market price for its product.
B) will produce where the demand curve is inelastic.
C) search for the price consistent with producing to the point at which marginal revenue
equals marginal cost.
D) search for the highest possible price consistent with maximizing its revenues, irrespective
of its explicit and implicit opportunity costs.
27) According to the above figure, the profit maximizing price output combination for the
monopolist is a price of
A) 50 cents and an output of 40,000 newspapers per day.
B) 30 cents and an output of 30,000 newspapers per day.
C) 60 cents and an output of 30,000 newspapers per day.
D) 45 cents and an output of 45,000 newspapers per day.
28) The monopolist is a
A) price taker who tries to find the profit maximizing rate of output.
B) price taker who tries to find the profit maximizing price.
C) price searcher who tries to find the profit maximizing price output combination.
D) price searcher who tries to find the rate of output that maximizes price.
29) A firm that must determine the price output combination that maximizes profit because it faces
a downward sloped demand curve
A) has a perfectly elastic demand curve. B) has a perfectly inelastic demand curve.
C) is a price taker. D) is a price searcher.
30) A monopolist maximizes profits by finding
A) the rate of output where marginal revenue equals marginal cost.
B) the rate of output where price equals marginal cost.
C) the price where price exceeds marginal revenue by that largest amount.
D) the price where average revenue and marginal cost are equal.
P Q TC
$13 10 $15
$12 14 $25
$11 19 $45
$10 25 $75
$9 30 $115
$8 35 $165
31) Refer to the above table. Given the demand and cost schedules, what is the profit maximizing
quantity for this monopolist?
A) 14 B) 19 C) 25 D) 30
32) Refer to the above table. Given the demand and cost schedules, what is the profit maximizing
price for this monopolist?
A) $9 B) $12 C) $11 D) $10
33) Refer to the above table. Given the demand and cost schedules, what are the maximum
economic profits for this monopolist?
A) $155 B) $143 C) $175 D) $164
P Q TC
$13 10 $8
$12 15 $30
$11 20 $68
$10 25 $128
$9 30 $208
$8 35 $308
34) Refer to the above table. Given the demand and cost schedules, what is the profit maximizing
quantity for this monopolist?
A) 15 B) 20 C) 25 D) 30
35) Refer to the above table. Given the demand and cost schedules, what is the profit maximizing
price for this monopolist?
A) $13 B) $12 C) $11 D) $10
36) Refer to the above table. Given the demand and cost schedules, what are the maximized
economic profits for this monopolist?
A) $122 B) $152 C) $220 D) $150
P Q MR MC
$7 20 $12 $2
$6 21 $14 $5
$5 22 $16 $10
$4 23 $18 $15
$3 24 $20 $20
$2 25 $22 $26
37) Refer to the above table. Given the demand and cost schedules, what is the profit maximizing
quantity for this monopolist?
A) 23 B) 21 C) 20 D) 24
38) Refer to the above table. Given the demand and cost schedules, what is the profit maximizing
price for this monopolist?
A) $3 B) $4 C) $6 D) $7
39) If a monopolist is producing the quantity at which price equals marginal cost, it should
A) continue to produce this amount if it wants to maximize profits.
B) reduce output if it wants to maximize profits.
C) reduce price and keep output unchanged if it wants to maximize profits.
D) increase output if it wants to maximize profits.
40) If a monopolist is producing the quantity at which marginal revenue equals marginal cost, it
should
A) continue to produce this amount if it wants to maximize profits.
B) reduce output if it wants to maximize profits.
C) increase price and keep output unchanged if it wants to maximize profits.
D) increase output if it wants to maximize profits.
41) If a monopolist is producing the quantity at which marginal revenue exceeds marginal cost, it
should
A) continue to produce this amount if it wants to maximize profits.
B) reduce output if it wants to maximize profits.
C) reduce price and keep output unchanged if it wants to maximize profits.
D) increase output if it wants to maximize profits.
42) A monopolist finds the output (Q*) rate that maximizes profit. It finds the price by
A) taking the height of the marginal revenue curve at output rate Q .
B) taking the height of the marginal cost curve at output rate Q .
C) taking the height of the demand curve at output rate Q .
D) setting price equal to marginal cost.
43) A monopolist who is maximizing profits produces to the point at which
A) marginal cost and average total cost are equal.
B) price, marginal cost and average variable cost are equal.
C) price is greater than marginal cost.
D) price is greater than average total cost.
44) The monopolist determines the price and quantity combination that maximizes short run
profits by
A) finding the quantity at which marginal cost and marginal revenue are equal and then
using the demand curve to find price.
B) determining the price by finding the highest price at which sales can be made and then
using the demand curve to find the appropriate quantity.
C) finding the point at which marginal revenue and demand intersect. This gives the price
and quantity that maximizes profits.
D) finding the quantity at which average revenue and average total cost are furthest apart.
45) If a monopolist produces to a point at which marginal revenue is less than marginal cost then
A) profits are being maximized.
B) profits will always be negative.
C) the incremental cost of producing the last unit exceeds the incremental revenue.
D) the incremental cost of producing the last unit is less than the incremental revenue.
46) If a monopolist produces to a point at which marginal revenue is greater than marginal cost
then
A) profits are being maximized.
B) profits will always be negative.
C) the incremental cost of producing the last unit exceeds the incremental revenue.
D) the incremental cost of producing the last unit is less than the incremental revenue.
47) If a monopolist produces to a point at which marginal revenue is less than marginal cost then
A) the firm should increase output.
B) the firm should reduce output.
C) the firm is maximizing profits.
D) we do not know if the firm should increase or reduce without more information.
48) If a monopolist produces to a point at which marginal revenue is more than marginal cost then
A) the firm should increase output.
B) the firm should reduce output.
C) the firm is maximizing profits.
D) we do not know if the firm should increase or reduce without more information.
49) Refer to the above figure. The profit maximizing quantity for this firm is
A) zero. B) Q1. C) Q2. D) Q3.
50) Refer to the above figure. The profit maximizing price for this firm is
A) P1. B) P2. C) P3. D) P4.
51) Refer to the above figure. Profits for this firm are
A) zero.
B) negative.
C) positive.
D) undetermined without more information.
52) Refer to the above figure. The profit maximizing price and output for this monopolist are
A) a price of P1and output of Q1. B) a price of P4and output of O1.
C) a price of P2and output of Q2. D) a price of P3and output of Q3.
53) Refer to the above figure. Profits for this firm are
A) negative.
B) zero.
C) positive.
D) undetermined without more information.
54) Refer to the above figure. The firm is currently producing at Q2. The firm should
A) reduce production. B) leave production as it is.
C) increase production. D) shut down.
55) Refer to the above figure. The firm is currently producing at Q1. The firm should
A) reduce production. B) leave production as it is.
C) increase production. D) shut down.
56) A monopolist
A) is a price searcher. B) is a price taker.
C) faces an upward sloping demand curve. D) faces a vertical demand curve.
57) A firm that can determine the price output combination in order to maximize profit is known as
a
A) price searcher. B) price taker.
C) demand searcher. D) cost taker.
58) The point of profit maximization for a monopolist is exemplified by
A) TR TC. B) MR MC. C) ATCmin. D) MR MC.
59) A monopolist determines the profit maximizing output
A) at the point at which TR TC.
B) at the point at which MR MC.
C) at any point it wants because it is the only producer of the product.
D) at the point at which TR is maximum.
60) Which of the following conditions hold true for both the perfectly competitive firm and the
monopoly at the profit maximizing output level?
A) MR P B) MC ATC C) MC P D) MR MC
61) A pure monopolist is selling 7 units at a price of $12. If the marginal revenue of the 8th unit is
$4, then the price of the 8th unit is
A) $10. B) $11.
C) greater than $12. D) $4.
62) A monopoly sells 10 units of output at $10. If the MR of the 11th unit is $4.50, then the price of
the 11th unit is
A) also $10. B) $9.50.
C) greater than $10. D) $7.25.
63) A monopoly sells 5 units of output at $20. If the MR of the 6th unit is $14, then the price of the
6th unit is
A) also $14. B) $17.
C) greater than $20. D) $19.
64) A monopolist is producing at an output level at which MR $6 and MC $9. It could increase
profits
A)
b
y increasing both output and price.
B)
b
y reducing output and by increasing price.
C)
b
y reducing both output and price.
D)
b
y increasing output and by reducing price.
65) A monopolist is producing at an output level at which MR $9 and MC $8. It could increase
profits
A)
b
y increasing both output and price.
B)
b
y reducing output and by increasing price.
C)
b
y reducing both output and price.
D)
b
y increasing output and by reducing price.
66) A monopolist is producing at an output level at which ATC $5, P $6, MC $3, and MR $4.
We can conclude that
A) economic profit could be increased by producing more.
B) economic profit could be increased by producing less.
C) economic profit cannot be increased.
D) the firm is earning $10 in economic profits.
67) A monopolist is producing at an output level at which ATC $5, P $6, MC $4, and MR $3.
We can conclude that
A) economic profit could be increased by producing more.
B) economic profit could be increased by producing less.
C) economic profit cannot be increased.
D) the firm is earning $10 in economic profits.
68) Assume that a monopoly is producing at a profit maximizing output level. If the firm s total
fixed costs decrease, the firm
A) should lower its price.
B) should increase its price.
C) should continue to produce at the same level.
D) increase its output level.
69) For a profit maximizing monopolist,
A) P MC. B) P MC. C) P MR. D) P ATC.
70) In the long run, all of the following are true for a monopolist EXCEPT
A) P ATC. B) P MC. C) MR MC. D) P AVC.
71) Which of the following is true of a perfectly competitive firm and a monopoly in the long run?
A) P MC B) P ATC C) MR MC D) P MR
72) For a monopoly earning positive economic profits at the profit maximizing output level, all of
the following are true EXCEPT
A) P ATC. B) P MR. C) P MC. D) P MR.
73) If a monopolist is producing at an output rate at which P ATC, then
A) its economic profit will be zero. B) its economic profit will be positive.
C) it is maximizing its profits. D) it is minimizing its losses.
74) Use the above figure. The profit maximizing output will be
A) Q1. B) Q2.
C) Q3. D) None of the above are correct.
75) Use the above figure. The profit maximizing price will be
A) P1. B) P2. C) P3. D) P4.
76) Use the above figure. The profit maximizing or loss minimizing output and price will be
A) Q1and P2. B) Q2and P3. C) Q3and P3. D) Q4and P1.
77) In the above figure, what is the profit maximizing price and output?
A) $9, 14 B) $13, 14 C) $11, 16 D) $10, 17
78) In the above figure, what is total revenue at the profit maximizing point?
A) $182 B) $126 C) $170 D) $176
79) In the above figure, what is total cost at the profit maximizing point?
A) $182 B) $126 C) $112 D) $170
80) In the above figure, what is total profit at the profit maximizing point?
A) $14 B) $56 C) $42 D) $70
81) In the above figure, the break even output and price is
A) $9 and 14. B) $13 and 14. C) $11 and 16. D) $10 and 17.
82) To maximize profits, the monopolist should produce at which
A) MR MC. B) MC intersects the demand curve.
C) total revenue is maximized. D) total costs are minimized.
83) How does a monopoly maximize profits? What price does it charge?
84) Unlike a perfect competitor, a profit maximizing monopolist produces at an output rate at
which marginal revenue exceeds marginal cost. Do you agree or disagree? Why
24.6 Calculating Monopoly Profit
1) A monopolist is maximizing profit at an output rate of 1,000 units per month. At this output
rate, the price that its customers are willing and able to pay is $8 per unit, average total cost is $5
per unit, and marginal cost is $6 per unit. It may be concluded that at this monthly output rate,
marginal revenue is
A) $5 per unit, and the monopolist earns zero economic profits.
B) $6 per unit, and the monopolist earns economic profits of $2,000 per month.
C) $6 per unit, and the monopolist earns economic losses of $1,000 per month.
D) $6 per unit, and the monopolist earns economic profits of $3,000 per month.
