Multiple Questions Answers
1. Refer to the following table showing a monopolist’s demand schedule:
Price Quantity
$50 300
40 600
20 800
10 1,000
What is marginal revenue for a price decrease from $50 to $40?
a. $9,000
b. $24,000
c. $30
d. $20
2. The market demand for a monopoly firm is estimated to be:
Qd = 100,000 – 500P +2M + 5,000PR
where Qd is is quantity demanded, P is price, M is income, and PR is the price of a related good. The manager has forecasted the values of M and PR will be $50,000 and $20, respectively, in 2012. The marginal cost function is estimated to be MC = 500 + 0.006Q. Total fixed cost in 2012 is expected to be $4 million.
The profit-maximizing price for 2012 is
a. $580.
b. $400.
c. $80.
d. $20.
3. The market demand for a monopoly firm is estimated to be:
Qd = 100,000 – 500P +2M + 5,000PR
where Qd is is quantity demanded, P is price, M is income, and PR is the price of a related good. The manager has forecasted the values of M and PR will be $50,000 and $20, respectively, in 2012. The marginal cost function is estimated to be MC = 500 + 0.006Q. Total fixed cost in 2012 is expected to be $4 million.
For 2012, the inverse demand function is
a. P = 600 − 0.001Q.
b. P = 300 − 0.002Q.
c. P = 600 − 0.004Q.
d. P = 600 – 0.002Q.
4. When a firm’s demand curve is tangent to its average total cost curve, the
a. firm must be operating at its efficient scale.
b. firm’s economic profit is zero.
c. firm must be incurring economic losses.
d. firm must be earning economic profits.
