Q: Suppose a monopolist sets a price of $$6 and produces 5 units. If the average total cost (ATC) is 4.50 $$and marginal cost (MC) is $2.00, what is the monopolist's economic profit?

$$6 \times 5 - 4.50 \times 5 = 7.50$

Question 1

Which of the following best describes a monopoly?

Accepted Answer

An industry with a single firm producing a unique product and significant barriers to entry.

Question 2

If a monopolist faces the demand curve $$P = 6 - Q$$, what is the marginal revenue (MR) curve?

Accepted Answer

$$MR = 6 - 2Q$$

Question 3

A monopolist maximizes profit by producing the quantity where:

Accepted Answer

Marginal revenue equals marginal cost.

Question 4

Which of the following is NOT a barrier to entry for a monopoly?

Accepted Answer

Low product differentiation.

Question 5

Suppose a monopolist sets a price of $$6 and produces 5 units. If the average total cost (ATC) is 4.50 $$and marginal cost (MC) is $2.00, what is the monopolist's economic profit?

Accepted Answer

$$6 	imes 5 - 4.50 	imes 5 = 7.50$

Question 6

In the short run, a monopolist can earn economic profits because:

Accepted Answer

Barriers to entry prevent new firms from entering.

Question 7

If a monopolist's demand curve is relatively inelastic, what happens to its ability to raise prices?

Accepted Answer

The monopolist can raise prices and increase total revenue.

Question 8

Which of the following industries is most likely to be a monopoly?

Accepted Answer

Providing tap water

Question 9

A monopolist's average revenue (AR) is always equal to:

Accepted Answer

Price (P)

Question 10

If a monopolist increases output by one unit, what happens to marginal revenue (MR)?

Accepted Answer

MR decreases because price must be lowered for all units sold.

Question 11

Which scenario best illustrates monopoly power in a real-world context?

Accepted Answer

A single company controls the supply of tap water in a city.

Question 12

If a monopolist faces the demand curve $$P = 6 - Q$$ and produces 3 units, what is the price charged?

Accepted Answer

$$P = 6 - 3 = 3$$

Question 13

Why is a monopolist's demand curve the same as the market demand curve?

Accepted Answer

Because the monopolist is the only seller in the market.

Question 14

Which of the following statements about monopolies is correct?

Accepted Answer

Monopolies can earn economic profits in the long run due to barriers to entry.

Question 15

If a monopolist's marginal cost (MC) is $$2.00$$ and marginal revenue (MR) is $$4.00$$, what should the monopolist do?

Accepted Answer

Increase output until MR equals MC.

Question 16

Which of the following is a plausible misconception about monopolies?

Accepted Answer

Monopolies can set any price they want without considering demand.

Question 17

If a monopolist's total revenue is $$8$$ and total cost is $$4.50 	imes 2 = 9$$, what is the economic profit?

Accepted Answer

$$8 - 9 = -1$$

Question 18

Which of the following best explains why monopolies can persist in the long run?

Accepted Answer

Significant barriers to entry prevent competition.

Question 19

If a monopolist's marginal revenue is negative, what does this imply about the demand curve?

Accepted Answer

The demand curve is downward sloping and total revenue is decreasing.

Question 20

Which of the following is NOT an example of a monopoly?

Accepted Answer

Growing wheat

Chap 15: Monopoly: Market Structure, Revenue, and Profit Maximization

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