Part1 Ch24
CHAPTER 24-Monopoly
TRUE/FALSE
1. Since a monopoly charges a price higher than marginal cost, it will produce an inefficient amount of output.
ANS: T DIF: 1
2. If the interest rate is 10%, a monopolist will choose a markup of price over marginal cost of at least 10%.
ANS: F DIF: 2
3. A natural monopoly occurs when a firm gains ownership of the entire stock of some natural resource and thus is able to exclude other producers.
ANS: F DIF: 1
4. Since a monopoly makes excess profits beyond the normal rate of return on investment, an investor is likely to get a higher rate of return in the stock market by investing in monopolistic rather than in competitive industries.
ANS: F DIF: 1
5. If he produces anything at all, a profit-maximizing monopolist with some fixed costs and no variable costs will set price and output so as to maximize revenue.
ANS: T DIF: 1
6. For a monopolist who faces a downward-sloping demand curve, marginal revenue is less than price whenever quantity sold is positive.
ANS: T DIF: 1
7. A monopolist with constant marginal costs faces a demand curve with a constant elasticity of demand and does not practice price discrimination. If the government imposes a tax of $1 per unit of goods sold by the monopolist, the monopolist will increase his price by more than $1 per unit.
ANS: T DIF: 2
8. A monopolist will always equate marginal revenue and marginal cost when maximizing profit.
ANS: T DIF: 1
MULTIPLE CHOICE
1. A monopolist faces the inverse demand function described by p = 50 – 4q, where q is output. The monopolist has no fixed cost and his marginal cost is $5 at all levels of output. Which of the following expresses the monopolist’s profits as a function of his output?
a.
50 – 4q – 5
b.
50 – 8q
c.
45q – 4q2
d.
50q – 4q2 – 5
e.
None of the above.
ANS: C DIF: 2
2. A monopolist faces the inverse demand function described by p = 23 – 5q, where q is output. The monopolist has no fixed cost and his marginal cost is $6 at all
TRUE/FALSE
1. Since a monopoly charges a price higher than marginal cost, it will produce an inefficient amount of output.
ANS: T DIF: 1
2. If the interest rate is 10%, a monopolist will choose a markup of price over marginal cost of at least 10%.
ANS: F DIF: 2
3. A natural monopoly occurs when a firm gains ownership of the entire stock of some natural resource and thus is able to exclude other producers.
ANS: F DIF: 1
4. Since a monopoly makes excess profits beyond the normal rate of return on investment, an investor is likely to get a higher rate of return in the stock market by investing in monopolistic rather than in competitive industries.
ANS: F DIF: 1
5. If he produces anything at all, a profit-maximizing monopolist with some fixed costs and no variable costs will set price and output so as to maximize revenue.
ANS: T DIF: 1
6. For a monopolist who faces a downward-sloping demand curve, marginal revenue is less than price whenever quantity sold is positive.
ANS: T DIF: 1
7. A monopolist with constant marginal costs faces a demand curve with a constant elasticity of demand and does not practice price discrimination. If the government imposes a tax of $1 per unit of goods sold by the monopolist, the monopolist will increase his price by more than $1 per unit.
ANS: T DIF: 2
8. A monopolist will always equate marginal revenue and marginal cost when maximizing profit.
ANS: T DIF: 1
MULTIPLE CHOICE
1. A monopolist faces the inverse demand function described by p = 50 – 4q, where q is output. The monopolist has no fixed cost and his marginal cost is $5 at all levels of output. Which of the following expresses the monopolist’s profits as a function of his output?
a.
50 – 4q – 5
b.
50 – 8q
c.
45q – 4q2
d.
50q – 4q2 – 5
e.
None of the above.
ANS: C DIF: 2
2. A monopolist faces the inverse demand function described by p = 23 – 5q, where q is output. The monopolist has no fixed cost and his marginal cost is $6 at all