BUS-310: Cost, Market Structures, and Managerial Decisions Quiz

Question 1:

Why do the managers of a monopoly produce the quantity that sets marginal revenue equal to marginal cost?

Question 2:

"If a monopolist maximizes its profits, at the profit-maximizing quantity, the demand for its product must be elastic."

Do you agree with this statement? Why or why not?

Question 3:

You are managing a pharmaceutical company that makes a patent-protected drug. According to your calculations, at the current level of production, the marginal revenue of one unit of the drug is less than the marginal cost of producing that unit.

To maximize your profit, should you increase, decrease, or maintain the current level of production? Explain your answer.

Question 4:

The figure below shows the market for central processing unit (CPU) chips.

Price and cost (dollars per memory chip) $9 $8 MC $7 ATC $6 $5 $4 $3 $2 D $1 MR 0 20 40 60 80 100 120 140 Quantity (millions of memory chips per month)Price and cost (dollars per memory chip) $9 $8 MC $7 ATC $6 $5 $4 $3 $2 D $1 MR 0 20 40 60 80 100 120 140 Quantity (millions of memory chips per month)