EC-120-Chapter-10

The figure below shows the demand schedule and demand curve for a product produced by a
single-price monopolist.

1) Suppose this single-price monopolist is initially selling 9 units at $4 each and then reduces the
price of the product to $3. By making this change, the revenue the firm gives up on the units it
was already selling is ________ and the revenue it gains on the additional units sold is
________. Its marginal revenue is therefore ________. (All figures are dollars)
A) 40; 27; -13 B) 30; 36; 6 C) 34; 28; -6
D) 9; 3; -6 E) 3; 9; 6

2) What is the level of output at which marginal revenue first becomes negative?
A) 5th unit B) 6th unit C) 7th unit
D) 8th unit E) 9th unit
The figure shows demand and marginal revenue for a single price monopoly.

3) For this single-price monopoly, demand is elastic at any price above

A) $2. B) $4. C) $6.
D) $8. E) $10.

4) Assume production costs are constant and equal to $6.00 (i.e., AC = MC = $6.00).
For this single-price monopoly, the profit-maximizing (or loss minimizing) level of output is
A) 250 units. B) 500 units. C) 750 units.
D) 1000 units. E) more than 1000 units.

5) Assume production costs are constant and equal to $6.00 (i.e., AC = MC = $6.00).
For this single-price monopoly, at the profit-maximizing (or loss minimizing) level of output,
price per unit is
A) $6. B) $7. C) $8.
D) $9. E) $10.

6) Assume production costs are constant and equal to $6.00 (i.e., AC = MC = $6.00).
For this single-price monopoly, at the profit-maximizing (or loss minimizing) level of output,
Total Revenue is
A) $750. B) $1500. C) $2500.
D) $3000. E) $4500.
Suppose a monopolist faces the demand curve and cost curves shown below.

7) A profit-maximizing single-price monopolist would charge the price

A) P0.
B) P1.
C) P2.
D) P3.
E) P4.

8) The average per unit profit earned by this profit-maximizing single-price monopolist is
A) P4 - P0.
B) P4 - P1.
C) P4 - P2.
D) P4 - P3.
E) P3 - P2.
Answer: C

9) If the single-price monopolist is producing at the profit-maximizing level of output, its total
cost is represented by the area
A) 0P4aQ0.
B) 0P3cQ3.
C) 0P1dQ1.
D) 0P2bQ0.
E) 0P0gQ5.
Your food-services company has been named as the monopoly provider of meals at a small
university. The cost and demand schedules are:

Price per ATC MC Total MR

Meal Total Cost Revenue
Sold per Day $ $ $
0 6.00 500 0
100 5.50 550 5.5 0.5 550 5.5
200 5.00 600 3 0.5 1000 4.5
300 4.50 675 2.25 0.75 1350 3.5
400 4.00 800 2 1.25 1600 2.5
500 3.50 950 1.9 1.5 1750 1.5
600 3.00 1200 2 2.5 1800 0.5
700 2.50 1600 2.29 4 1750 -0.5

10) Assuming this firm is a single-price monopolist, which of the following best approximates
the firm's profit-maximizing output and price?
A) 150 meals at $5.50 per meal B) 250 meals at $0.75 per meal
C) 350 meals at $2.50 per meal D) 500 meals at $3.5 per meal
E) 550 meals at $3.25 per meal

11) Assume this firm is a single-price monopolist. At the profit-maximizing level of output, the
elasticity of demand is
A) less than one. B) one. C) greater than one.
D) infinite. E) impossible to know with the available information.

12) Assume this firm is a single-price monopolist. If this firm provided 400 meals per day, its
profits per day would be ________; if the firm provided 700 meals per day its profits would be
________.
A) $1600; $1750 B) $400; $150 C) $400; -$400
D) $1750; $1600 E) $800; $150

13) For this monopolist, at what level of output is its marginal revenue equal to its marginal cost?
A) between 200 and 300 B) between 300 and 400
C) between 400 and 500 D) between 600 and 700
E) at no level of output.

14) If this firm is providing 500 meals per day, what is its profit per meal served?
A) -$0.50 B) $1.60 C) $1.90
D) $2.00 E) $3.50
Suppose a single-price monopolist knows the following information:

Fixed
Price Quantity TR MR Cost TC ATC MC
$9.00 1500 $4.00 $7000 $7.00 $5.00

15) The total profit being earned by this firm at the current level of output is
A) $1500. B) $3000. C) $6500.
D) $10 500. E) $13 500.

Suppose a single-price monopolist knows the following information:

Fixed
Price Quantity TR MR Cost TC ATC MC
$5.00 2000 $4.00 $2000 $5.00 $3.00

16) The monopolist could maximize profits in the short run by

A) staying at the current price and output.
B) lowering price and increasing output.
C) lowering price and leaving output unchanged.
D) raising price and lowering output.
E) shutting down.

Suppose a single-price monopolist knows the following information:

Fixed
Price Quantity TR MR Cost TC ATC MC
5.00 2000 $4.00 $2000 $5.00 $3.00

17) The total profit being earned by this firm at the current level of output is
A) -$2000. B) -$1000. C) 0.
D) $1000. E) $2000.