The Ultimate Quiz On Microeconomics Part II

30 Questions | Total Attempts: 162

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The Ultimate Quiz On Microeconomics Part II

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Questions and Answers
  • 1. 
    For the monopolist shown below, the profit maximizing level of output is:   
    • A. 

      Q3

    • B. 

      Q1

    • C. 

      Q2

    • D. 

      Q4

    • E. 

      Q5

  • 2. 
    Compared to the equilibrium price and quantity sold in a competitive market, a monopolist will charge a ________ price and sell a ________ quantity
    • A. 

      Higher; smaller

    • B. 

      Lower; larger

    • C. 

      Lower; smaller

    • D. 

      Higher; larger

    • E. 

      None of these

  • 3. 
    If a monopolist sets her output such that marginal revenue, marginal cost and average total cost are equal, economic profit must be: 
    • A. 

      Positive

    • B. 

      Negative

    • C. 

      Zero

    • D. 

      Indeterminate from the given information.

  • 4. 
    A monopolist has equated marginal revenue to zero. The firm has: 
    • A. 

      Maximized revenue.

    • B. 

      Maximized profit.

    • C. 

      Minimized profit.

    • D. 

      Minimized cost.

  • 5. 
    A monopolist has determined that at the current level of output the price elasticity of  demand is -0.15. Which of the following statements is true? 
    • A. 

      The firm should increase output

    • B. 

      The firm should cut output.

    • C. 

      This is typical for a monopolist; output should not be altered.

    • D. 

      None of the above is necessarily correct.

  • 6. 
    A monopolist has set her level of output to maximize profit. The firm's marginal revenue is $20, and the price elasticity of demand is -2.0. The firm's profit maximizing price is approximately: 
    • A. 

      $20

    • B. 

      This problem cannot be answered without knowing the marginal cost.

    • C. 

      $0

    • D. 

      $40

    • E. 

      $10

  • 7. 
    Scenario 1: Barbara is a producer in a monopoly industry. Her demand curve, total revenue curve, marginal revenue curve and total cost curve are given as follows: Q = 160 - 4P      TR = 40Q - 0.25^(Q^2)   MR = 40 - 0.5Q     TC = 4Q      MC = 4   Refer to Scenario 1. How much output will Barbara produce?
    • A. 

      0

    • B. 

      72

    • C. 

      22

    • D. 

      56

    • E. 

      None of the above

  • 8. 
    Scenario 1: Barbara is a producer in a monopoly industry. Her demand curve, total revenue curve, marginal revenue curve and total cost curve are given as follows: Q = 160 - 4P      TR = 40Q - 0.25^(Q^2)   MR = 40 - 0.5Q     TC = 4Q      MC = 4 Refer to Scenario 1. The price of her product will be ________. 
    • A. 

      32

    • B. 

      42

    • C. 

      72

    • D. 

      4

    • E. 

      22

  • 9. 
    Barbara is a producer in a monopoly industry. Her demand curve, total revenue curve, marginal revenue curve and total cost curve are given as follows: Q = 160 - 4P      TR = 40Q - 0.25^ (Q^2)     MR = 40 - 0.5Q     TC = 4Q      MC = 4 Refer to Scenario 1. How much profit will she make? 
    • A. 

      -996

    • B. 

      1,296

    • C. 

      1,568

    • D. 

      0

    • E. 

      None of the above

  • 10. 
    Scenario 3: The demand curve and marginal revenue curve for red herrings are given as follows:             Q = 250 - 5P             MR = 50 - 0.4Q Refer to Scenario 3. The marginal cost of red herrings is given as:  MC = 0.6Q. What is the profit-maximizing level of output? 
    • A. 

      25

    • B. 

      0

    • C. 

      50

    • D. 

      60

    • E. 

      125

  • 11. 
    The demand curve and marginal revenue curve for red herrings are given as follows:             Q = 250 - 5P             MR = 50 - 0.4Q  Refer to Scenario 3. At the profit-maximizing level of output, demand is:
    • A. 

      Infinitely elastic.

    • B. 

      Inelastic, but not completely inelastic

    • C. 

      Unit elastic

    • D. 

      Elastic, but not infinitely elastic

    • E. 

      Completely inelastic

  • 12. 
    The revenue and cost curves in the diagram above are those of a natural monopoly.   Refer to Figure 10.1. If the monopolist is not regulated, the price will be set at ________. 
    • A. 

      P1

    • B. 

      P4

    • C. 

      P3

    • D. 

      P2

    • E. 

      None of the above

  • 13. 
    Refer to Figure 10.1. Suppose that the government decides to limit monopoly power with price regulation. If the government sets the price at the competitive level, it will set the price at _____.
    • A. 

      P3

    • B. 

      P2

    • C. 

      P1

    • D. 

      P4

    • E. 

      None of the above

  • 14. 
    With respect to monopolies, dead weight loss refers to the:
    • A. 

      Lost consumer surplus from monopolistic pricing.

    • B. 

      Socially unproductive amounts of money spent to obtain or acquire a monopoly.

    • C. 

      Net loss in consumer and producer surplus due to a monopolist's pricing strategy/policy.

    • D. 

      None of the above.

  • 15. 
    If the regulatory agency sets a price where AR = AC for a natural monopoly, output will be:
    • A. 

      Equal to the monopoly profit maximizing level.

    • B. 

      Equal to the competitive level.

    • C. 

      Greater than the competitive level.

    • D. 

      Greater than the monopoly profit maximizing level and less than the competitive level.

  • 16. 
    If a monopolist's profits were taxed away and redistributed to its consumers:
    • A. 

      Inefficiency would remain, but not because output would be lower than under competitive conditions.

    • B. 

      Inefficiency would remain because output would be lower than under competitive conditions.

    • C. 

      Efficiency would be obtained because output would be increased to the competitive level.

    • D. 

      Efficiency would be obtained because output would be increased and profits removed.

  • 17. 
    Which of the following statements about natural monopolies is true?
    • A. 

      Natural monopolies cannot be regulated.

    • B. 

      Natural monopolies are in the markets for natural resources (like crude oil and coal).

    • C. 

      For natural monopolies, average cost is always increasing.

    • D. 

      For natural monopolies, marginal cost is always below average cost.

  • 18. 
    Refer to Figure 10.2. At output Qm, and assuming that the monopoly has set her price to maximize profit, the consumer surplus is: 
    • A. 

      0DEQm

    • B. 

      BDEF

    • C. 

      ADEG

    • D. 

      CDE

    • E. 

      None of the above

  • 19. 
    A monopolist has set her level of output to maximize profit.  The firm's marginal revenue is $20, and the price elasticity of demand is -2.0. The firm's profit maximizing price is approximately:
    • A. 

      $0

    • B. 

      $20

    • C. 

      $40

    • D. 

      $10

    • E. 

      This problem cannot be answered without knowing the marginal cost

  • 20. 
    Scenario 2: A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 - 2P;   MR = 100 – Q;   TC = 5Q;      MC = 5.  Refer to Scenario 2. What level of output maximizes total revenue?
    • A. 

      0

    • B. 

      90

    • C. 

      95

    • D. 

      100

    • E. 

      None of the above

  • 21. 
    Scenario 2: A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 - 2P;   MR = 100 – Q;   TC = 5Q;      MC = 5.  Refer to Scenario 2. What is the profit maximizing level of output? 
    • A. 

      0

    • B. 

      90

    • C. 

      95

    • D. 

      100

    • E. 

      None of the above

  • 22. 
    Scenario 2: A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 - 2P;   MR = 100 – Q;   TC = 5Q;      MC = 5.  Refer to Scenario 2. What is the profit maximizing price?
    • A. 

      $95.00

    • B. 

      $5.00

    • C. 

      $52.50

    • D. 

      $10.00

  • 23. 
    • A. 

      $4512.50

    • B. 

      $4987.00

    • C. 

      $475.00

    • D. 

      $5.00

  • 24. 
    Scenario 2: A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 - 2P;   MR = 100 – Q;   TC = 5Q;      MC = 5.  Refer to Scenario 2. Suppose that a tax of $5 for each unit produced is imposed by state government. What is the profit maximizing level of output?
    • A. 

      0

    • B. 

      90

    • C. 

      95

    • D. 

      100

    • E. 

      None of the above

  • 25. 
    If a monopolist's profits were taxed away and redistributed to its consumers:
    • A. 

      Inefficiency would remain because output would be lower than under competitive conditions.

    • B. 

      Inefficiency would remain, but not because output would be lower than under competitive conditions.

    • C. 

      Efficiency would be obtained because output would be increased to the competitive level.

    • D. 

      Efficiency would be obtained because output would be increased and profits removed.