Question 1

A monopolist faces a downward-sloping demand curve. If the monopolist lowers its price to sell more units, which of the following best describes the price and output effects on total revenue?

Accepted Answer

The price effect decreases total revenue, while the output effect increases total revenue.

Question 2

Given the following data for a monopolist: When quantity increases from 2 to 3, price falls from $$60 to 50. $$What is the marginal revenue for the third unit?

Accepted Answer

$10

Question 3

Which of the following statements is TRUE regarding monopoly and perfect competition?

Accepted Answer

A monopoly’s marginal revenue is less than its average revenue.

Question 4

If a monopolist’s total revenue is maximized at a certain quantity, what is the value of marginal revenue at that quantity?

Accepted Answer

$$0$$

Question 5

Suppose a monopolist can sell 4 units at $$40 each or 5 units at 30 $$each. What is the marginal revenue of selling the 5th unit?

Accepted Answer

$$-10$$

Question 6

Which of the following best explains why a monopolist’s marginal revenue is always less than the price of the good?

Accepted Answer

Because the monopolist must lower the price on all units sold to sell an additional unit.

Question 7

If a monopolist’s demand curve is $$P = 100 - 2Q$$, what is the marginal revenue function?

Accepted Answer

$$MR = 100 - 4Q$$

Question 8

A monopolist is considering increasing output from 3 to 4 units. The price falls from $$50 to 40. $$What is the change in total revenue?

Accepted Answer

$$0$$

Question 9

Which of the following is a key difference between a monopolist and a perfectly competitive firm?

Accepted Answer

A perfectly competitive firm faces a horizontal demand curve, while a monopolist faces a downward-sloping demand curve.

Question 10

If a monopolist’s average revenue is $$40$$ and marginal revenue is $$10 at a $$certain output, what can be inferred about the elasticity of demand at that output?

Accepted Answer

Demand is elastic.

Question 11

Suppose a monopolist’s total revenue function is $$TR = 80Q - 2Q^2$. What is the marginal revenue function?

Accepted Answer

$$MR = 80 - 4Q$$

Question 12

A monopolist’s marginal revenue becomes negative when:

Accepted Answer

Total revenue is decreasing as output increases.

Question 13

If a monopolist’s marginal revenue is positive, what does this imply about the elasticity of demand?

Accepted Answer

Demand is elastic.

Question 14

Which of the following is NOT a characteristic of monopoly?

Accepted Answer

There are no barriers to entry.

Question 15

If a monopolist’s marginal revenue is zero, what is happening to total revenue as output increases?

Accepted Answer

Total revenue is maximized.

Monopoly Revenue: Price Effect, Output Effect, and Marginal Revenue

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