Fill This Form To Receive Instant Help
Homework answers / question archive / Intermediate Microeconomic Theory II ECONOMICS 2151B001 Department of Economics Western University PRACTICE EXAM Multiple Choice Questions 1)A monopolist faces a demand curve and that the monopolist has a constant marginal cost of 75
Intermediate Microeconomic Theory II
ECONOMICS 2151B001
Department of Economics
Western University
PRACTICE EXAM
Multiple Choice Questions
1)A monopolist faces a demand curve and that the monopolist has a constant marginal cost of 75. The monopolist's profitmaximizing price is
2. The marginal revenue curve for a monopolist A) will never take a linear form.
3. Which of the following statements regarding price discrimination is true?
4. With seconddegree price discrimination
Use the following to answer questions 59.
Use the following diagram to answer the question(s).
5. The total economic benefit under monopoly would be
6. The total economic benefit under perfect competition would be
7. The deadweight loss under monopoly would be
8. The profitmaximizing price for a perfectly competitive firm would be
9. The profitmaximizing price for a monopolist would be
10. A monopolist will produce where A) demand is elastic.
11. Which of the following is a realworld example of firstdegree price discrimination?
12. A monopolist faces inverse demand P = 400 – 4Q^{d} and has constant marginal cost MC = 80. If this monopolist engages in firstdegree price discrimination, total output will equal
13. Suppose that a firm faces a demand curve for its product of P = 10 – Q^{d} . The corresponding marginal revenue curve is MR = 10 – 2Q. The firm has a constant marginal cost of $4 per unit. If the firm engages in uniform pricing, what price will the firm charge? A) $7.
14. When a monopoly sells its product in multiple markets, it should
15. When a movie theater charges a lower ticket price for senior citizens and/or students, the movie theater is engaging in A) price gouging.
16. A monopolist faces linear inverse demand P = a – bQ and constant marginal cost, c. Which of the following gives a correct formula for the monopolist's profit maximizing price? A) P = (a/b – c)
marginal cost of 20. The IEPR formula for this monopolist could be stated in the
following way: 


A) 


B) 


C) 


D) 


19. All consumers are alike and each has an inverse demand curve for a monopolist's product of P = 100 – 2Q. The marginal cost of production is constant at MC = $10. Let the monopolist charge a price of $10 per unit purchased and a subscription fee of $2025 that must be paid by each purchaser. What is the amount of consumer's surplus generated by this scheme?
20. Suppose that the perfectly competitive soybean industry in the United States is monopolized. Under perfect competition, the equilibrium price was $2 and quantity was 100,000. The monopolist raises price to $5 and restricts quantity to 70,000. Assume that the monopolist is maximizing profits and that the monopolist faces a linear, upwardsloping marginal cost curve that begins at the origin. Also assume that this marginal cost curve is the industry supply curve under perfect competition. What is the loss in consumer surplus that the monopolist captures in the form of profit?
21. Let the inverse demand curve for a monopolist's product be P = 100 – 2Q and the marginal cost of production be constant at MC = 10. Suppose that the firm considers moving from a uniform pricing strategy to a twoblock tariff where the first block provides 15 units at a price of P_{1} = $70 and the second block provides an additional 15 units at a price of P_{2} = $40. How much does the monopolist's profit rise with this scheme?
22. You own a small bookstore. You have hired a marketing firm to calculate your own price elasticity of demand and your advertising elasticity of demand. The firm has provided you with the relevant numbers regardless of minor adjustments in price or advertising budget. Your own price elasticity of demand is around –1.7, and your advertising elasticity of demand is around 0.05. How much should you markup your price over your marginal cost for your books? A) By approximately a factor of 0.41.
23. Suppose a monopolist faces a demand curve Q = aP^{b} and that the monopolist has a constant marginal cost of C. The monopolist's profitmaximizing price is

A) 


B) 


C) 

D) P = C(1/b)
24. A monopolist faces inverse demand P = a  bQ. The monopolist's marginal revenue function is
25. The reason that profitmaximizing firms willingly incur the added expense of advertising is that they hope that successful advertising will increase profits by A) increasing average costs.
Use the following to answer questions 2628.
Use the following table to answer the question(s).
Customer 
Product A Reservation Price 
Product B Reservation Price 
1 
1,000 
200 
2 
800 
400 
Marginal Cost 
500 
100 
26. If the firm does not bundle the products, what single price should the firm charge for product B to maximize profit?
27. If the firm does not bundle the products, what single price should the firm charge for product A to maximize profit?
28. If the firm bundles the products, what single price should the firm charge for the bundle to maximize profit?
29. A monopolist maximizes total revenue where marginal revenue A) equals marginal cost.
30. You own a small bookstore. You have hired a marketing firm to calculate your own price elasticity of demand and your advertising elasticity of demand. The firm has provided you with the relevant numbers regardless of minor adjustments in price or advertising budget. Your own price elasticity of demand is around –1.7, and your advertising elasticity of demand is around 0.05. Interpret the advertising elasticity of demand.
Short Answer Questions
1. Suppose a profitmaximizing monopolist producing Q units of output faces the demand curve P = 20  Q. Its total cost when producing Q units of output is TC = 24 + Q^{2}. The fixed cost is sunk, and the marginal cost curve is MC = 2Q.
c) How much extra surplus does the producer capture when it can engage in firstdegree price discrimination instead of charging a uniform price?
2. The demand curve for a certain good is P = 100  Q. The marginal cost for a monopolist is MC(Q) = Q, for Q 30. The maximum that can be supplied in this market is Q = 30, that is, the marginal cost is infinite for Q > 30.
3. A firm produces output, measured by Q, which is sold in a market in which the price P = 20, regardless of the size of Q. The output is produced using only one input, labor (measured by L); the production function is Q(L) = L. There are many suppliers of labor, and the supply schedule is w = 2L, where w is the wage rate. The firm is a monopsonist in the labor market.
4. The monopolist faces a demand curve given by Q = 10P^{−3}. Its cost function is TC = 2Q. What is its optimal level of output and price?
Already member? Sign In