Question 1

Suppose a monopolist faces a downward-sloping demand curve. If the monopolist lowers the price to sell more units, which of the following best describes the effect on marginal revenue?

Accepted Answer

Marginal revenue will be less than the price.

Question 2

Given the following data for a monopolist: At Q = 3, Price = $$50, Total Revenue = 150. $$What is the marginal revenue for increasing output from Q = 2 to Q = 3?

Accepted Answer

$40

Question 3

Which of the following statements about monopoly and perfect competition is correct?

Accepted Answer

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

Question 4

If a monopolist increases output, which of the following is most likely to occur?

Accepted Answer

Marginal revenue may decrease and can become negative.

Question 5

A monopolist sells 4 units at a price of $$40 each, earning total revenue of 160. If $$the price drops to $30 and 5 units are sold, what is the marginal revenue of the 5th unit?

Accepted Answer

$10

Question 6

Which formula correctly calculates marginal revenue for a monopolist?

Accepted Answer

$$MR = \frac{\Delta TR}{\Delta Q}$$

Question 7

Why does a monopolist’s marginal revenue curve lie below its demand curve?

Accepted Answer

Because the monopolist must lower the price on all units to sell more, reducing additional revenue.

Question 8

In the market for cable subscriptions, if the monopolist increases the number of subscribers from 2 to 3 and total revenue rises from $$120 to 150$$, what is the average revenue at Q = 3?

Accepted Answer

$50

Question 9

Which of the following best describes the price effect for a monopolist?

Accepted Answer

The firm earns less revenue per unit sold because of the price decrease.

Question 10

If a monopolist faces the demand curve $$P = 80 - 10Q$$, what is the total revenue function?

Accepted Answer

$$TR = 80Q - 10Q^2$

Question 11

Which of the following is a consequence of the output effect for a monopolist?

Accepted Answer

The firm earns more revenue because it sells more quantity at the lower price.

Question 12

Which of the following is NOT a characteristic of monopoly markets?

Accepted Answer

Marginal revenue equals price

Question 13

If a monopolist’s marginal revenue is negative, what does this imply about total revenue?

Accepted Answer

Total revenue is decreasing.

Question 14

Which statement is true regarding the elasticity of a monopolist’s demand curve compared to the market demand curve?

Accepted Answer

A monopolist’s demand curve is the same as the market demand curve.

Question 15

If a monopolist faces the demand curve $$P = 80 - 10Q$$, what is the marginal revenue function?

Accepted Answer

$$MR = 80 - 20Q$$

Question 16

Which of the following best explains why barriers to entry are important for monopoly power?

Accepted Answer

They prevent new firms from entering, allowing the monopolist to maintain market power.

Question 17

If a monopolist’s average revenue at Q = 4 is $$40, and its marginal revenue for the 4th unit is 20$$, what does this indicate about the relationship between AR and MR?

Accepted Answer

Average revenue is greater than marginal revenue.

Question 18

Which of the following is true about the total revenue test for a monopolist?

Accepted Answer

If total revenue increases as price decreases, demand is elastic.

Monopoly Revenue: Marginal and Average Revenue in Monopoly Markets

Study Guide - Practice Questions

Study Guide - Flashcards