CHAPTER 25: Monopoly
MULTIPLE CHOICE
1. In Problem 1, if the demand schedule for Bong’s book is Q = 2,000 − 100p, the cost of having the
book typeset is $9,000, and the marginal cost of printing an extra book is $4, then he would maximize
his profits by
a.
having it typeset and selling 800 copies.
b.
having it typeset and selling 1,000 copies.
c.
not having it typeset and not selling any copies.
d.
having it typeset and selling 1,600 copies.
e.
having it typeset and selling 400 copies.
2. In Problem 1, if the demand schedule for Bong’s book is Q = 5,000 − 100p, the cost of having the
book typeset is $6,000, and the marginal cost of printing an extra book is $4, then he would maximize
his profits by
a.
not having it typeset and not selling any copies.
b.
having it typeset and selling 4,600 copies.
c.
having it typeset and selling 2,500 copies.
d.
having it typeset and selling 2,300 copies.
e.
having it typeset and selling 1,150 copies.
3. In Problem 1, if the demand schedule for Bong’s book is Q = 3,000 − 100p, the cost of having the
book typeset is $9,000, and the marginal cost of printing an extra book is $4, then he would maximize
his profits by
a.
having it typeset and selling 1,300 copies.
b.
having it typeset and selling 2,600 copies.
c.
having it typeset and selling 1,500 copies.
d.
not having it typeset and not selling any copies.
e.
having it typeset and selling 650 copies.
4. In Problem 1, if the demand schedule for Bong’s book is Q = 2,000 − 100p, the cost of having the
book typeset is $9,000, and the marginal cost of printing an extra book is $4, then he would maximize
his profits by
a.
having it typeset and selling 1,600 copies.
b.
not having it typeset and not selling any copies.
c.
having it typeset and selling 1,000 copies.
d.
having it typeset and selling 800 copies.
e.
having it typeset and selling 400 copies.
5. In Problem 1, if the demand schedule for Bong’s book is Q = 3,000 − 100p, the cost of having the
book typeset is $10,000, and the marginal cost of printing an extra book is $4, then he would maximize
his profits by
a.
having it typeset and selling 1,300 copies.
b.
having it typeset and selling 1,500 copies.
c.
having it typeset and selling 2,600 copies.
d.
not having it typeset and not selling any copies.
e.
having it typeset and selling 650 copies.
6. In Problem 2, if the demand for pigeon pies is given by p(y) = 110 − y/3, then the level of output that
will maximize Peter’s profit is
a.
169.
b.
33.
c.
330.
d.
495.
e.
None of the above.
7. In Problem 2, if the demand for pigeon pies is given by p(y) = 140 − y/4, then the level of output that
will maximize Peter’s profit is
a.
56.
b.
560.
c.
284.
d.
840.
e.
None of the above.
8. In Problem 2, if the demand for pigeon pies is given by p(y) = 50 − y/2, then the level of output that
will maximize Peter’s profit is
a.
100.
b.
50.
c.
150.
d.
10.
e.
None of the above.
9. In Problem 2, if the demand for pigeon pies is given by p(y) = 140 − y/2, then the level of output that
will maximize Peter’s profit is
a.
28.
b.
420.
c.
280.
d.
140.
e.
None of the above.
10. In Problem 2, if the demand for pigeon pies is given by p(y) = 140 − y/3, then the level of output that
will maximize Peter’s profit is
a.
630.
b.
214.
c.
420.
d.
42.
e.
None of the above.
11. A profit-maximizing monopoly faces an inverse demand function described by the equation p(y) = 30
− y and its total costs are c(y) = 6y, where prices and costs are measured in dollars. In the past it was
not taxed, but now it must pay a tax of 2 dollars per unit of output. After the tax, the monopoly will
a.
increase its price by 2 dollars.
b.
increase its price by 3 dollars.
c.
increase its price by 1 dollar.
d.
leave its price constant.
e.
None of the above.
12. A profit-maximizing monopoly faces an inverse demand function described by the equation p(y) = 60
− y and its total costs are c(y) = 10y, where prices and costs are measured in dollars. In the past it was
not taxed, but now it must pay a tax of 4 dollars per unit of output. After the tax, the monopoly will
a.
increase its price by 4 dollars.
b.
leave its price constant.
c.
increase its price by 2 dollars.
d.
increase its price by 6 dollars.
e.
None of the above.
13. A profit-maximizing monopoly faces an inverse demand function described by the equation p(y) = 50
− y and its total costs are c(y) = 10y, where prices and costs are measured in dollars. In the past it was
not taxed, but now it must pay a tax of 2 dollars per unit of output. After the tax, the monopoly will
a.
leave its price constant.
b.
increase its price by 2 dollars.
c.
increase its price by 3 dollars.
d.
increase its price by 1 dollar.
e.
None of the above.
14. A profit-maximizing monopoly faces an inverse demand function described by the equation p(y) = 90
− y and its total costs are c(y) = 8y, where prices and costs are measured in dollars. In the past it was
not taxed, but now it must pay a tax of 8 dollars per unit of output. After the tax, the monopoly will
a.
increase its price by 4 dollars.
b.
leave its price constant.
c.
increase its price by 8 dollars.
d.
increase its price by 12 dollars.
e.
None of the above.
15. A profit-maximizing monopoly faces an inverse demand function described by the equation p(y) = 90
− y and its total costs are c(y) = 9y, where prices and costs are measured in dollars. In the past it was
not taxed, but now it must pay a tax of 4 dollars per unit of output. After the tax, the monopoly will
a.
increase its price by 4 dollars.
b.
increase its price by 2 dollars.
c.
leave its price constant.
d.
increase its price by 6 dollars.
e.
None of the above.
16. A firm has invented a new beverage called Slops. It doesn’t taste very good, but it gives people a
craving for Lawrence Welk’s music and Professor Johnson’s jokes. Some people are willing to pay
money for this effect, so the demand for Slops is given by the equation q = 10 − p. Slops can be made
at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before
any Slops can be produced, the firm must undertake a fixed cost of $30. Since the inventor has a patent
on Slops, it can be a monopolist in this new industry.
a.
The firm will produce 5 units of Slops.
b.
A Pareto improvement could be achieved by having the government pay the firm a
subsidy of $35 and insisting that the firm offer Slops at zero price.
c.
From the point of view of social efficiency, it is best that no Slops be produced.
d.
The firm will produce 10 units of Slops.
e.
None of the above.
17. A firm has invented a new beverage called Slops. It doesn’t taste very good, but it gives people a
craving for Lawrence Welk’s music and Professor Johnson’s jokes. Some people are willing to pay
money for this effect, so the demand for Slops is given by the equation q = 16 − p. Slops can be made
at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before
any Slops can be produced, the firm must undertake a fixed cost of $69. Since the inventor has a patent
on Slops, it can be a monopolist in this new industry.
a.
The firm will produce 16 units of Slops.
b.
A Pareto improvement could be achieved by having the government pay the firm a
subsidy of $74 and insisting that the firm offer Slops at zero price.
c.
From the point of view of social efficiency, it is best that no Slops be produced.
d.
The firm will produce 8 units of Slops.
e.
None of the above.
18. A firm has invented a new beverage called Slops. It doesn’t taste very good, but it gives people a
craving for Lawrence Welk’s music and Professor Johnson’s jokes. Some people are willing to pay
money for this effect, so the demand for Slops is given by the equation q = 18 − p. Slops can be made
at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before
any Slops can be produced, the firm must undertake a fixed cost of $86. Since the inventor has a patent
on Slops, it can be a monopolist in this new industry.
a.
The firm will produce 9 units of Slops.
b.
From the point of view of social efficiency, it is best that no Slops be produced.
c.
A Pareto improvement could be achieved by having the government pay the firm a
subsidy of $91 and insisting that the firm offer Slops at zero price.
d.
The firm will produce 18 units of Slops.
e.
None of the above.
19. A firm has invented a new beverage called Slops. It doesn’t taste very good, but it gives people a
craving for Lawrence Welk’s music and Professor Johnson’s jokes. Some people are willing to pay
money for this effect, so the demand for Slops is given by the equation q = 20 − p. Slops can be made
at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before
any Slops can be produced, the firm must undertake a fixed cost of $105. Since the inventor has a
patent on Slops, it can be a monopolist in this new industry.
a.
The firm will produce 10 units of Slops.
b.
From the point of view of social efficiency, it is best that no Slops be produced.
c.
A Pareto improvement could be achieved by having the government pay the firm a
subsidy of $110 and insisting that the firm offer Slops at zero price.
d.
The firm will produce 20 units of Slops.
e.
None of the above.
20. A firm has invented a new beverage called Slops. It doesn’t taste very good, but it gives people a
craving for Lawrence Welk’s music and Professor Johnson’s jokes. Some people are willing to pay
money for this effect, so the demand for Slops is given by the equation q = 18 − p. Slops can be made
at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before
any Slops can be produced, the firm must undertake a fixed cost of $86. Since the inventor has a patent
on Slops, it can be a monopolist in this new industry.
a.
The firm will produce 9 units of Slops.
b.
A Pareto improvement could be achieved by having the government pay the firm a
subsidy of $91 and insisting that the firm offer Slops at zero price.
c.
From the point of view of social efficiency, it is best that no Slops be produced.
d.
The firm will produce 18 units of Slops.
e.
None of the above.
21. The demand for Professor Bongmore’s new book is given by the function Q = 4,000 − 100p. If the cost
of having the book edited and typeset is $17,000, if the marginal cost of printing an extra copy is $4,
and if he has no other costs, then he would maximize his profits by
a.
having it edited and typeset and selling 1,800 copies.
b.
having it edited and typeset and selling 2,000 copies.
c.
not having it edited and typeset and not selling any copies.
d.
having it edited and typeset and selling 3,600 copies.
e.
having it typeset and selling 900 copies.
22. The demand for Professor Bongmore’s new book is given by the function Q = 8,000 − 100p. If the cost
of having the book edited and typeset is $7,000, if the marginal cost of printing an extra copy is $4,
and if he has no other costs, then he would maximize his profits by
a.
having it edited and typeset and selling 4,000 copies.
b.
not having it edited and typeset and not selling any copies.
c.
having it edited and typeset and selling 3,800 copies.
d.
having it edited and typeset and selling 7,600 copies.
e.
having it typeset and selling 1,900 copies.
23. The demand for Professor Bongmore’s new book is given by the function Q = 5,000 − 100p. If the cost
of having the book edited and typeset is $20,000, if the marginal cost of printing an extra copy is $4,
and if he has no other costs, then he would maximize his profits by
a.
not having it edited and typeset and not selling any copies.
b.
having it edited and typeset and selling 2,300 copies.
c.
having it edited and typeset and selling 2,500 copies.
d.
having it edited and typeset and selling 4,600 copies.
e.
having it typeset and selling 1,150 copies.
24. The demand for Professor Bongmore’s new book is given by the function Q = 8,000 − 100p. If the cost
of having the book edited and typeset is $17,000, if the marginal cost of printing an extra copy is $4,
and if he has no other costs, then he would maximize his profits by
a.
having it edited and typeset and selling 3,800 copies.
b.
having it edited and typeset and selling 4,000 copies.
c.
not having it edited and typeset and not selling any copies.
d.
having it edited and typeset and selling 7,600 copies.
e.
having it typeset and selling 1,900 copies.
25. The demand for Professor Bongmore’s new book is given by the function Q = 6,000 − 100p. If the cost
of having the book edited and typeset is $18,000, if the marginal cost of printing an extra copy is $4,
and if he has no other costs, then he would maximize his profits by
a.
having it edited and typeset and selling 2,800 copies.
b.
not having it edited and typeset and not selling any copies.
c.
having it edited and typeset and selling 5,600 copies.
d.
having it edited and typeset and selling 3,000 copies.
e.
having it typeset and selling 1,400 copies.
26. In Problem 1, if demand for the book is Q = 1,000 − 300p, the marginal revenue function is given by
a.
300.
b.
1,000 − 600.
c.
3.33 − Q/150.
d.
3.33Q − Q2/300.
e.
−1/300.
27. In Problem 1, if demand for the book is Q = 1,400 − 100p, the marginal revenue function is given by
a.
100.
b.
14 − Q/50.
c.
1,400 − 200.
d.
14Q − Q2/100.
e.
−1/100.
28. In Problem 1, if demand for the book is Q = 2,000 − 300p, the marginal revenue function is given by
6.67Q − Q2/300.
e.
−1/300.
29. In Problem 1, if demand for the book is Q = 1,600 − 100p, the marginal revenue function is given by
a.
16Q − Q2/100.
b.
16 − Q/50.
c.
1,600 − 200.
d.
100.
e.
−1/100.
30. In Problem 1, if demand for the book is Q = 900 − 300p, the marginal revenue function is given by
a.
3 − Q/150.
b.
900 − 600.
c.
3Q − Q2/300.
d.
300.
e.
−1/300.
31. In Problem 6, if there are no fixed costs and marginal cost is constant at $44, the price elasticity of
demand at the profit-maximizing level of output is closest to
a.
20.39.
b.
25.14.
c.
22.57.
d.
210.29.
e.
20.19.
32. In Problem 6, if there are no fixed costs and marginal cost is constant at $24, the price elasticity of
demand at the profit-maximizing level of output is closest to
a.
−1.63.
b.
−0.61.
c.
−3.26.
d.
−6.53.
e.
−0.31.
33. In Problem 6, if there are no fixed costs and marginal cost is constant at $56, the price elasticity of
demand at the profit-maximizing level of output is closest to
a.
−0.28.
b.
−7.09.
c.
−3.55.
300.
b.
6.67 − Q/150.
c.
2,000 − 600.
d.
d.
−14.18.
e.
−0.14.
34. In Problem 6, if there are no fixed costs and marginal cost is constant at $48, the price elasticity of
demand at the profit-maximizing level of output is closest to
a.
−5.69.
b.
−0.35.
c.
−11.38.
d.
−2.85.
e.
−0.18.
35. In Problem 6, if there are no fixed costs and marginal cost is constant at $8, the price elasticity of
demand at the profit-maximizing level of output is closest to
a.
−1.17.
b.
−4.70.
c.
−0.85.
d.
−2.35.
e.
−0.43.