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Because a monopoly's demand curve is the same as the market demand curve for its product

a. the monopoly's average total cost always falls as it increases its output.
b. the monopoly is a price taker.
c. the monopoly must lower its price to sell more of its product.
d. the monopoly's marginal revenue equals its price.

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Vaishali Yadav
Vaishali YadavLv10
5 Sep 2020
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Related questions

Consider a durable good monopolist whose product is usable for only 2 periods. However, each consumer can benefit from the product only for one period. The quality of the product does not diminish over time and thus those who bought the product in period 1 can sell it in period 2 (if they find buyers). Assume also that the production cost is zero. The inverse demand curve in each period is given by P = 16 - Q where Q denotes the quantity available at that period. Both the consumers and the monopolist use a discount factor d is an element of [0,1] to discount future income or profits.

a) Assuming that the monopolist can commit to future prices and quantities, determine the optimal quantities and price in each period. What is the monopoly's profit? Indicate whether your answer depends on the discount factor d

b) Assume now that the monopolist cannot commit to second-period prices and quantities. Determine the optimal quantities and price in each period. What is the monopoly's profit? Indicate whether your answer depends on the discount factor d

A. A competitive firm

  1. can consider only its location in setting the price.
  2. must base its competitive price on product differentiation.
  3. has the ability to set its own price.
  4. must accept the price determined by the intersection of the market supply and demand curves.
  5. has no supply curve.

B.Ā If a firm is making an economic profit, then

  1. the factors of production are being paid their opportunity costs.
  2. there will be no change in the number of firms if the industry is perfectly competitive.
  3. the factors of production are being paid less than their opportunity costs.
  4. the factors of production are being paid more than their opportunity costs.
  5. the firm will exit the industry

C.Ā Along a downward-sloping monopoly demand curve,

  1. marginal revenue is greater than price.
  2. the elasticity of demand is constant.
  3. marginal revenue decreases when the price decreases.
  4. marginal revenue is equal to zero when the price is equal to zero

D.Ā If, in the short run, a perfectly competitive firm is producing at a point where the total cost is greater than total revenue, then the firm should

  1. shut down because economic profits are negative.
  2. continue to produce as long as P > AVC.
  3. continue to produce because accounting profits are positive.
  4. set a higher price for its output.
  5. set a lower price for its output

E.Ā For a perfectly competitive firm, the demand curve is

  1. the marginal revenue curve.
  2. perfectly inelastic.
  3. always equal to marginal cost.
  4. the same as the market demand curve

F.Ā A firm in a(n) industry will have the most elastic demand curve

  1. monopolistic
  2. oligopolistic
  3. monopolistically competitive
  4. perfectly competitive

G.Ā If the demand curve of a monopolist is in the inelastic range, then

  1. total revenue will fall if the price increases.
  2. total revenue will be unchanged if the price increases.
  3. total revenue will rise if the price increases.
  4. the total supply will increase by an equal amount if demand increases.
  5. the price will be unchanged if total revenue increases

H. Monopolistic competition and oligopoly are examples of

  1. monopoly.
  2. perfect competition.
  3. theories of consumer behavior.
  4. imperfect competition.
  5. the extreme cases on the market structure continuum

I.Ā Under which market structure do firms face the flattest (most elastic) demand curve?

  1. perfect competition
  2. monopolistic competition
  3. oligopoly
  4. monopoly

J.Ā At the point of long-run equilibrium for a perfectly competitive firm,

  1. economic profits are zero.
  2. TR > TC.
  3. TR < TC.
  4. P = AVC.
  5. normal profits are zero.

Suppose that a monopoly firm finds that its MR is $72 for the first unit sold each day, $71 for the second unit sold each day, $70 for the third unit sold each day, and so on. Further suppose that the first worker hired produces 5 units per day, the second 4 units per day, the third 3 units per day, and so on.

Instructions: Enter your answers as whole numbers.

a. What is the firm's MRP for each of the first five workers?

Worker MRP, unregulated
1 Ā 
2 Ā 
3 Ā 
4 Ā 
5 Ā 

b. Suppose that the monopolist is subjected to rate regulation and the regulator stipulates that it must charge exactly $62 per unit for all units sold. At that price, what is the firm's MRP for each of the first five workers?

Worker MRP, regulated
1 Ā 
2 Ā 
3 Ā 
4 Ā 
5 Ā 

c. If the daily wage paid to workers is $258 per day, how many workers will the unregulated monopoly demand? Worker(s).

If the daily wage paid to workers is $258 per day, how many workers will the regulated monopoly demand? Worker(s).

Looking at those figures, will the regulated or the unregulated monopoly demand more workers at that wage? Unregulated/Regulated.

d. If the daily wage paid to workers falls to $121 per day, how many workers will the unregulated monopoly demand? Worker(s).

If the daily wage paid to workers falls to $121 per day, how many workers will the regulated monopoly demand? Worker(s).

Looking at those figures, will the regulated or the unregulated monopoly demand more workers at that wage? Unregulated/Regulated.

e. Comparing your answers to parts c and d, does regulating a monopoly's output price always increase its demand for resources? Yes/No.

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