Microeconomics Student Value Edition 8th Edition by Robert Pindyck -Test Bank

Microeconomics Student Value Edition 8th Edition by Robert Pindyck -Test Bank

Microeconomics, 8e (Pindyck/Rubinfeld)
Chapter 10 Market Power: Monopoly and Monopsony

10.1 Monopoly

1) When the demand curve is downward sloping, marginal revenue is
A) equal to price.
B) equal to average revenue.
C) less than price.
D) more than price.
Answer: C
Diff: 1
Section: 10.1

2) For the monopolist shown below, the profit maximizing level of output is:

A) Q1.
B) Q2.
C) Q3.
D) Q4.
E) Q5.
Answer: A
Diff: 1
Section: 10.1

3) How much profit will the monopolist whose cost and demand curves are shown below earn at output Q1?

A) 0CDQ1
B) 0BEQ1
C) 0AFQ1
D) ACDF
E) BCDE
Answer: E
Diff: 1
Section: 10.1

4) Which of the following is NOT true regarding monopoly?
A) Monopoly is the sole producer in the market.
B) Monopoly price is determined from the demand curve.
C) Monopolist can charge as high a price as it likes.
D) Monopoly demand curve is downward sloping.
Answer: C
Diff: 1
Section: 10.1

5) Which of the following is true at the output level where P=MC?
A) The monopolist is maximizing profit.
B) The monopolist is not maximizing profit and should increase output.
C) The monopolist is not maximizing profit and should decrease output.
D) The monopolist is earning a positive profit.
Answer: C
Diff: 1
Section: 10.1

6) Compared to the equilibrium price and quantity sold in a competitive market, a monopolist will charge a ________ price and sell a ________ quantity.
A) higher; larger
B) lower; larger
C) higher; smaller
D) lower; smaller
E) none of these
Answer: C
Diff: 1
Section: 10.1

7) Assume that a profit maximizing monopolist is producing a quantity such that marginal revenue exceeds marginal cost. We can conclude that the
A) firm is maximizing profit.
B) firm’s output is smaller than the profit maximizing quantity.
C) firm’s output is larger than the profit maximizing quantity.
D) firm’s output does not maximize profit, but we cannot conclude whether the output is too large or too small.
Answer: B
Diff: 1
Section: 10.1

8) To find the profit maximizing level of output, a firm finds the output level where
A) price equals marginal cost.
B) marginal revenue and average total cost.
C) price equals marginal revenue.
D) all of the above
E) none of the above
Answer: E
Diff: 1
Section: 10.1

9) As the manager of a firm you calculate the marginal revenue is $152 and marginal cost is $200. You should
A) expand output.
B) do nothing without information about your fixed costs.
C) reduce output until marginal revenue equals marginal cost.
D) expand output until marginal revenue equals zero.
E) reduce output beyond the level where marginal revenue equals zero.
Answer: C
Diff: 1
Section: 10.1

10) Suppose that a firm can produce its output at either of two plants. If profits are maximized, which of the following statements is true?
A) The marginal cost at the first plant must equal marginal revenue.
B) The marginal cost at the second plant must equal marginal revenue.
C) The marginal cost at the two plants must be equal.
D) all of the above
E) none of the above
Answer: D
Diff: 1
Section: 10.1