A)The firm should cut output. B)This is typical for a monopolist; output should

Question

A)The firm should cut output.
B)This is typical for a monopolist; output should not be altered.
C)The firm should increase output.

D)None of the above is necessarily correct.

C) The monopolist is not maximizing profit and should decrease output.
D) The monopolist is earning a positive profit.

Suppose the marginal cost of a monopolist is constant at $8. The marginal revenue curve is given as: MR = 80 - 4Q. The profit maximizing price is

A) $8.

B) $48.

C) $64.

D) $44.

Consider a monopolist producing at the profit-maximizing level of output. MR = $10, and the price elasticity of demand is -3. The firm's profit maximizing price is approximately:

A) $3.33

B) $15

C) $20

D) $30

Suppose that a monopolist's price must fall from $8 to $7 when sales increase from 6 to 7 units of output. Marginal revenue equals:

A) $1

B) $7

C) $8

D) None of the other responses is correct.

1) Consider the following market demand and supply curves for monthly basic cable service by ACME Cable:

Qs = -80 + 8P

Qd = 200 - 2P

where P is the monthly subscription price, and Q is millions of households.

A. Find the equilibrium quantity and price in a competitive market.

B. Suppose ACME Cable is a monopolist with MR = 100 - Q. Calculate the size of the deadweight loss.

The are no fixed csots. Average variable costs are constant at $5 per unit.

Explanation / Answer

A)The firm should cut output.

B) The monopolist is not maximizing profit and should increase output.

A) $3.33

D) None of the other responses is correct.Since MR=-$1

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