1 .Which statement is TRUE? A) If the monopolist\'s marginal revenue is greater
ID: 1218945 • Letter: 1
Question
1 .Which statement is TRUE?
A) If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price per unit.
B) If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling fewer units at a higher price per unit.
C) When a monopolist produces where MR < MC it always earns a positive economic profit.
D) A monopolist is guaranteed monopoly profits by the government.
2.If the monopolist's demand is given by P = 100 – Q, marginal revenue is given by:
A) MR = 100 – 2Q.
B) MR = 100 – Q.
C) MR = 100Q.
D) MR = 100Q – Q2.
3. A monopolist sells in two different markets and charges the same price of $10 in both markets. In Market A, the demand curve is described by Qd = 50 – 2P. In Market B, the demand curve is described by Qd = 60 – P. If the monopolist lowers prices by $1 in the market with the more elastic demand and raises prices by $1 in the market with the more inelastic demand curve, by how much does its total revenue change?
A) –$27
B) $459
C) $767
D) $308
4. When demand is inelastic, revenues increase and production costs decrease as the quantity produced declines, total profits will always increase with a higher price. Therefore, monopolists:
A) can't exist.
B) can't exist for industries in which demand is relatively inelastic.
C) can't maximize profits if they face a relatively inelastic demand.
D) will always raise their price until they get to an elastic portion of the demand curve
5. Rex Pharma produces anti-acid medication that is sold in a monopoly market. ' Rex Pharma sells 10,000,000 pills for $12.50 per pill. If the pills were sold for the marginal cost of production of $0.50, Rex Pharma would be able to sell 25,000,000 pills. What is the deadweight loss of this monopoly market?
A) $90,000,000
B) $120,000,000
C) $5,000,000
D) $12,500,000
6. When a single firm can supply the entire market at a lower cost than two or more firms, the firm can be said to have which of the following characteristics?
A) It must be producing at the socially optimal level of output.
B) It is a natural monopoly.
C) The marginal cost curve rises at an increasing rate.
D) It is one of two firms in the industry.
7. With health insurance, medical treatments are often paid by someone other than the patient, which will make consumers with serious diseases relatively:
A) insensitive to the price of pharmaceuticals.
B) sensitive to the price of pharmaceuticals.
C) insensitive to the premium of health insurance.
D) sensitive to the premium of health insurance.
8. Generating electricity:
A) no longer requires a natural monopoly, but the transmission and distribution of electricity remains a natural monopoly.
B) requires a natural monopoly, along with the transmission and distribution of electricity.
C) requires a natural monopoly but not the transmission and distribution of electricity.
D) and the transmission and distribution of electricity are no longer natural monopolies
Explanation / Answer
1.
A) If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price per unit.
as in the case of higher marginal revenue , we know that the maximum profit will occur at the level of where marginal revenue will equal to the marginal cost. So in this case to increase the profit, marginal revenue i,e, also the price can be lower to the level of marginal costs to sell more units and earn high profits.
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