Question

1. Which of the following is true under a monopoly?

• A. Monopolist chooses the highest possible price.
  
• B. Monopolist chooses a price that is always higher than marginal cost of production.
  
• C. Marginal revenue of a monopolist is price.
  
• D. None of the above are true for monopoly.
  

2. You are the manager of a monopoly that faces a demand curve described by P = 230 -20Q. Your costs are C = 5 +30Q. The profit-maximizing output for your firm is:

• A. 4
  
• B. 5
  
• C. 6
  
• D. 7
  

3. Which of the following is true?

• A. A monopolist produces on the inelastic portion of its demand.
  
• B. A monopolist always earns an economic profit.
  
• C. The more inelastic the demand, the closer marginal revenue is to price.
  
• D. In the short run a monopoly will shutdown if P < AVC.
  

4. In a competitive industry with identical firms, long rum equilibrium is characterized by:

• A. P = AC
  
• B. P = MC
  
• C. MR = MC
  
• D. All of the above
  

5. You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C = 40 + 5Q^2. Your firm's maximum profits are:

• A. 125
  
• B. 250
  
• C. 100
  
• D. 85
  

6. A perfectly competitive firm faces:

• A. A perfectly elastic demand function
  
• B. A perfectly inelastic demand function
  
• C. a demand function with unitary elasticity
  
• D. none of the above