1.Which of the following is true at the output level where P=MC?

a)

The monopolist is maximizing profit.

b)

The monopolist is not maximizing profit and should increase output.

c)

The monopolist is not maximizing profit and should decrease output.

d)

The monopolist is earning a positive profit.

2. Compared to the equilibrium price and quantity sold in a competitive market, a monopolist will charge a ______________ price and sell a ______________ quantity.

a)

higher; larger

b)

lower; larger

c)

higher; smaller

d)

lower; smaller

e)

none of these

3. As the manager of a firm you calculate the marginal revenue is $152 and marginal cost is $200. You should

a)

expand output.

b)

do nothing without information about your fixed costs.

c)

reduce output until marginal revenue equals marginal cost.

d)

expand output until marginal revenue equals zero.

e)

reduce output beyond the level where marginal revenue equals zero.

4. Suppose that a firm can produce its output at either of two plants. If profits are maximized, which of the following statements is true?

a)

The marginal cost at the first plant must equal marginal revenue.

b)

The marginal cost at the second plant must equal marginal revenue.

c)

The marginal cost at the two plants must be equal.

d)

all of the above.

e)

none of the above.

5. When a per unit tax is imposed on the sale of a product of a monopolist, the resulting price increase will

a)

always be less than the tax.

b)

always be more than the tax.

c)

always be less than if a similar tax were imposed on firms in a competitive market.

d)

not always be less than the tax.

6. A monopolist has determined that at the current level of output the price elasticity of

demand is -0.15.:

a)

The firm should cut output.

b)

This is typical for a monopolist; output should not be altered.

c)

The firm should increase output.

d)

None of the above is necessarily correct.

7. A monopolist has set her level of output to maximize profit. The firm's marginal revenue is $20 and the price elasticity of demand is -2.0. The firm's profit maximizing price is approximately:

a)

$0

b)

$20

c)

$40

d)

$10

e)

this problem cannot be answered without knowing the marginal cost.

Use the following information to answer the questions below.

The demand for tickets to the Meatloaf concert (Q) is given as follows:

                Q = 120,000 - 2,000P

The marginal revenue is given as:

                MR = 60 - .001Q

The stadium at which the concert is planned holds 60,000 people. The marginal cost of each additional concert goer is essentially zero up to 60,000 fans, but becomes infinite beyond that point.

8. Given the information above, what is the profit maximizing number of tickets sold and the price of tickets?

a)

0, $60

b)

20,000, $50

c)

40,000, $40

d)

60,000, $30

e)

80,000, $20

Use the following information to answer the questions below.

The demand for tickets to the Meatloaf concert (Q) is given as follows:

                Q = 120,000 - 2,000P

The marginal revenue is given as:

                MR = 60 - .001Q

The stadium at which the concert is planned holds 60,000 people. The marginal cost of each additional concert goer is essentially zero up to 60,000 fans, but becomes infinite beyond that point.

9. Suppose that the municipal stadium authority imposes a tax of $10 per ticket on the concert promoters. Given the information above, the profit maximizing ticket price would

a)

increase by $10.

b)

increase by $5.

c)

not change.

d)

decrease by $5.

e)

decrease by $10.

10. The _____ elastic a firm's demand curve, the greater its _____.

a)

less; monopoly power

b)

less; output

c)

more; monopoly power

d)

more; costs

11. Under which of the following scenarios is it most likely that monopoly power will be exhibited by firms?

a)

When there are few firms in the market and the demand curve faced by each firm is highly inelastic.

b)

When there are many firms in the market and the demand curve faced by each firm is highly inelastic.

c)

When there are few firms in the market and the demand curve faced by each firm is highly elastic.

d)

When there are many firms in the market and the demand curve faced by each firm is highly elastic.

12. If the regulatory agency sets a price where P=AC for a natural monopoly, output will be

a)

equal to the competitive level.

b)

equal to the monopoly profit maximizing level.

c)

greater than the monopoly profit maximizing level and less than the competitive level.

d)

greater than the competitive level.

13. Which of the following strategies are used by business firms to capture consumer surplus?

a)

price discrimination.

b)

bundling.

c)

two-part tariffs.

d)

all of the above.

14. A tennis pro charges $15 per hour for tennis lessons for children, and $30 per hour for tennis lessons for adults. The tennis pro is practicing

a)

first-degree price discrimination.

b)

second-degree price discrimination.

c)

third-degree price discrimination.

d)

fourth-degree price discrimination.

e)

fifth-degree price discrimination.

15. A firms sells an identical product to two groups of consumers, A and B. The firm has decided that third-degree price discrimination is feasible and wishes to set prices that maximize profits. Which of the following best describes the price and output strategy that will maximize profits?

a)

PA = PB = MC.

b)

MRA = MRB.

c)

MRA = MRB = MC.

d)

(MRA - MRB) = (1 - MC).

16. A local restaurant offers "early bird" price discounts for dinners ordered from 4:30 to 6:30 PM. This is an example of

a)

peak-load pricing.

b)

second-degree price discrimination.

c)

a two-part tariff.

d)

tying.

e)

none of the above.

17. Bundling products makes sense for the seller when

a)

consumers have heterogeneous demands.

b)

the products are complementary in nature.

c)

firms cannot price discriminate.

d)

both (a) and (c).

18. Bundling is effective when demands are ____________ and ____________ correlated.

a)

different; negatively

b)

different; positively

c)

similar; negatively

d)

similar; positively

e)

identical; perfectly

19. Which of the following conditions, if present, is sufficient to make a game cooperative?

a)

Individual payoffs are greater if all players choose the same strategy.

b)

Players can communicate with each other.

c)

Players can negotiate binding contracts committing them to particular strategies.

d)

Players must agree unanimously on any set of strategies.

e)

The payoff that is highest for all individuals together is also highest for each individual player.

For the questions below, consider the following game:

20. Which of the following is true for the above game?

a)