A monopoly is distinguished from a firm operating under any other market structure in the following way: the monopoly A)charges a price higher than its average revenue. B)can choose its output level. C)can choose its level of cost. D)does not produce at a profit-maximizing level of output. E)faces a demand curve which is identical to the market demand curve.

A monopoly is distinguished from a firm operating under any other market structure in the following way: the monopoly A)charges a price higher than its average revenue. B)can choose its output level. C)can choose its level of cost. D)does not produce at a profit-maximizing level of output. E)faces a demand curve which is identical to the market demand curve.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter9: Monopoly

Section: Chapter Questions

Problem 8SQ

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How does the monopoly determine the level of output that maximizes profit? Group of answer choices By determining where marginal revenue is equal to marginal cost. A monopoly does not need to calculate where maximum profit occurs because they have no competition and can set any price they want for their product. By determining where total revenue equals marginal cost. By multiplying price by marginal cost.
A single-price monopoly A) must lower the price for all customers if it wants to increase its sales. B) must practice price discrimination. C) can lower its price for only a few select consumers if it wants to increase its sales. D) will set its price equal to a consumer's willingness to pay. E) is able to raise its price as high as it wants and consumers must still buy from it because it is a monopoly.
Which of the following statements is TRUE? A) A monopoly cannot set price and quantity such that the point lies above the demand curve. B) A monopoly can charge whatever it wants. C) Profit maximization occurs by setting price first. D) Both A and B. The more inelastic the demand curve, a monopoly A) will have a smaller Lerner Index. B) will face a lower marginal cost. C) will earn less profit. D) will lose fewer sales as it raises its price.
There is a monopoly firm that faces the demand curve: P= 100(1-.01Q) and has a constant marginal cost of production equal to $20. Find the equilibrium price and output of this firm.
Exercises Exercise #1. Suppose a single-product monopoly facing a linear demand q = a – p with a > 0. The monopoly incurs a constant marginal cost 0 < c < a and has no fixed cost. A) Determine the profit maximizing price. B) Determine the profit maximizing quantity. C) Determine the monopoly's profit. D) Determine the inverse demand expressing p as a function of q. E) Determine the marginal revenue. F) Explain whether it matters if the monopoly sets price instead of quantity. G) Determine the consumer surplus. H) Determine the deadweight loss because of the exercise of market power (compared to the perfectly competitive equilibrium). I) Determine the price elasticity of demand at the monopoly's profit maximizing price. J) Determine the price elasticity of demand at the perfectly competitive price.
If a firm successfully engages in product innovation, resulting in monopoly power for the new good/service, which of the following is generally true? The innovating firm will not be able to earn any producer surplus from the production and sale of the new product/service. The new market will generate surplus for the innovating firm, but an inefficiently high level of the good will be produced and consumed. The new market will generate surplus for the innovating firm, but an inefficiently low level of the good will be produced and consumed. None of these is generally true.