Problem 1: Assume for a competitive firm that MC = AVC at $12, MC = ATC at $20, and MC = MR at $16. This firm will:
A. realize a profit of $4 per unit of output.
B. maximize its profit by producing in the short run.
C. minimize its losses by producing in the short run.
D. shut down in the short run.
Problem 2: If a non-discriminating pure monopolist decides to sell one more unit of output, the marginal revenue associated with that unit will be:
A. equal to its price.
B. the price at which that unit is sold less the price reductions which apply to all other units of output.
C. the price at which that unit is sold plus the price increases which apply to all other units of output.
D. indeterminate unless marginal cost data are known.
Problem 3: For a nondiscriminating imperfectly competitive firm:
A. the marginal revenue curve lies above the demand curve.
B. the demand and marginal revenue curves coincide.
C. the demand curve intersects the horizontal axis where total revenue is at a maximum.
D. marginal revenue will become zero at that output where total revenue is at a maximum.
Problem 4: A profit-maximizing monopolist will set its price:
A. as far above ATC as possible.
B. along the elastic portion of its demand curve.
C. where the marginal cost curve intersects the demand curve.
D. as close as possible to the minimum point of ATC.
Answer the next question(s) on the basis of the following information for a pure monopolist:
Output Total cost Product price
0 $250 $500
1 260 300
2 290 250
3 350 200
4 480 150
5 700 100
Question 5: At its profit-maximizing output, the above monopolist:
A. incurs a loss.
B. earns a loss.
C. eaens a normal profit of $250
D. earns an economic profit of $150
Total Price Marginal Average total Marginal
output revenue cost cost
1 $100 $100 $100.00 $30
2 90 80 63.00 26
3 80 60 52.67 32
4 70 40 49.50 40
5 60 20 49.60 50
6 50 0 50.00 52
7 40 -20 52.29 66
8 30 -40 55.75 80
9 20 -60 60.67 100
10 10 -80 67.60 130
Question 6. Refer to the above data for a non-discriminating monopolist. At its profit-maximizing output, this firm's price will exceed its marginal cost by ____ and its average total cost by ____.
A. $20; $27.33
B. $10; $10.40
C. $24; $27.33
D. $30; $20.50