Microeconomics Exam 2 Chapter 12

1. For a pure monopolist the relationship between total revenue and marginal revenue is such that:

C. marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative when total revenue is decreasing.

2. For a pure monopolist, marginal revenue is less than price because:

C. when a monopolist lowers price to sell more output, the lower price applies to all units sold.

3. Refer to the diagram for a nondiscriminating monopolist. Demand is elastic:

C. for all levels of output less than q 2.

4. Refer to the diagram for a nondiscriminating monopolist. Marginal revenue will be zero at output:

B. q 2

5. Refer to the diagram for a nondiscriminating monopolist. The profit-seeking monopolist will:

C. never produce an output larger than q 2.

6. Assume a pure monopolist is currently operating at a price-quantity combination on the inelastic segment of its demand curve. If the monopolist is seeking maximum profits, it should:

D. charge a higher price.

7. A pure monopolist should never produce in the:

B. inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price.

8. Assuming no change in product demand, a pure monopolist:

D. must lower price to increase sales.

9. If a monopolist were to produce in the inelastic segment of its demand curve:

C. the firm would not be maximizing profits.

10. If a pure monopolist is operating in a range of output where demand is elastic:

B. marginal revenue will be positive but declining.

11. Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9. We thus know that:

C. total revenue is increasing.

12. A pure monopolist is selling six units at a price of $12. If the marginal revenue of the seventh unit is $5, then the:

B. price of the seventh unit is $11.

13. The vertical distance between the horizontal axis and any point on a nondiscriminating monopolist’s demand curve measures:

D. product price and average revenue.

14. The diagram indicates that the marginal revenue of the sixth unit of output is:

A. -$1.

15. Which of the following is incorrect ? Imperfectly competitive producers:

B. do not compete with one another.

16. Answer the question on the basis of the following table showing the demand schedule facing a nondiscriminating monopolist:

Refer to the table. The profit-maximizing monopolist will sell at a price:

D. that cannot be determined with the information provided.

17. Answer the question on the basis of the following table showing the demand schedule facing a nondiscriminating monopolist:

Refer to the table. Assume that this monopolist faces zero production costs. The profitmaximizing monopolist will set a price of:

C. $5.

18. If a nondiscriminating pure monopolist decides to sell one more unit of output, the marginal revenue associated with that unit will be:

B. the price at which that unit is sold less the price reductions that apply to all other units of output.