Questions on Monopoly:

16. The monopolist has no supply curve because

A) the quantity supplied at any particular price depends on the monopolist's demand curve.

B) the monopolist's marginal cost curve changes considerably over time.

C) the relationship between price and quantity depends on both marginal cost and average cost.

D) there is a single seller in the market.

E) although there is only a single seller at the current price, it is impossible to know how many sellers would be in the market at higher prices.

17. Use the following two statements to answer this question:

I.For a monopolist, at every output level, average revenue is equal to price.

II.For a monopolist, at every output level, marginal revenue is equal to price.

A) Both I and II are true.

B) I is true, and II is false.

C) I is false, and II is true.

D) Both I and II are false.

E) Statements I and II could either be true or false depending upon demand.

18. A multiplant monopolist can produce her output in either of two plants. Having sold all of her output she discovers that the marginal cost in plant 1 is $30 while the marginal cost in plant 2 is $20. To maximize profits the firm will

A) produce more output in plant 1 and less in the plant 2.

B) do nothing until it acquires more information on revenues.

C) produce less output in plant 1 and more in plant 2.

D) produce less in both plants until marginal revenue is zero.

E) shut down plant 1 and only produce at plant 2 in the future.

19. With respect to monopolies, deadweight loss refers to the

A) socially unproductive amounts of money spent to obtain or acquire a monopoly.

B) net loss in consumer and producer surplus due to a monopolist's pricing strategy/policy.

C) lost consumer surplus from monopolistic pricing.

D) none of the above

For questions 20 and 21, refer to the scenario presented below:

Barbara is a producer in a monopoly industry.Her demand curve, total revenue curve, marginal revenue curve and total cost curve are given as follows:

Q = 160 - 4PTR = 40Q - 0.25Q2MR = 40 - 0.5QTC = 4QMC = 4

20. How much output will Barbara produce?

A) 0

B) 22

C) 56

D) 72

E) none of the above

21. The price of her product will be ________.

A) 4

B) 22

C) 32

D) 42

E) 72

22. How much profit will she make?

A) -996

B) 0

C) 1,296

D) 1,568

E) none of the above

23. Bancroft Pharmaceuticals has a patent on a new medication used to treat high blood pressure, so it is the monopoly seller of this new drug product.The marginal cost of producing one dose of the drug is $10, and the elasticity of demand for the product is -3.What is the profit maximizing monopoly price for this patented drug product?

A) $10

B) $12.50

C) $15

D) $30

24. The monopolist that maximizes profit

A) imposes a cost on society because the selling price is above marginal cost.

B) imposes a cost on society because the selling price is equal to marginal cost.

C) does not impose a cost on society because the selling price is above marginal cost.

D) does not impose a cost on society because price is equal to marginal cost.

25. The more elastic the demand facing a firm,

A) the higher the value of the Lerner index.

B) the lower the value of the Lerner index.

C) the less monopoly power it has.

D) the higher its profit.