b. Represents the opportunity cost of the firm. c. Is the minimum amount of firm must receive to engage in trade. d. Is a measure of what a firm gains from trade. Deadweight loss occurs when a. Consumer surplus is negative. b. Consumer surplus is reduced. c. Consumer surplus is greater than producer surplus. d. Surplus losses to one group due to intervention are not offset by surplus gains to another. Currently, when a consumer purchases a “green” automobile, the U.S. government gives the consumer a rebate. When the rebate program expires, we would expect a. Producer surplus to increase. b. Consumer surplus to drop.
c. Consumer surplus to remain unchanged, since they pay the price and only get the rebate later. d. Producers to stop making “green” automobiles. A consumer’s marginal willingness to pay a. Changes with price. b. Is equal to the marginal value to the consumer of the last unit of output. c. Is the minimum price a consumer will pay for the last unit of output. d. Is the first derivative of the demand curve. Producer surplus equals a. Profit plus fixed cost. b. Total revenue minus total variable cost. c. Total revenue minus the sum of all marginal cost. d. All of the above. If the inverse demand function for a monopoly’s product is p = 100 – 2Q, then the firm’s marginal revenue function is a. 200 – 4Q b. 200 – 2Q c. -2 d. 100 – 4Q If the inverse demand curve a monopoly faces is p = 100 – 2Q, and MC is constant at 16, then profit maximization a. Is achieved when 21 units are produced. b. Is achieved only by shutting down in the short run. c. Is achieved by setting price equal to 21. d. Cannot be determined solely from the information provided. The monopoly maximizes profit by setting a. Marginal revenue equal to zero. b. Price equal to marginal cost. c. Price equal to marginal revenue. d. Marginal revenue equal to marginal cost. When a monopoly lowers its price to increase quantity a. It is not maximizing its profit. b. It will increase its profit. c. The quantity produced drives down marginal revenue. d. It will make less money on the units it would have originally sold. Marginal Revenue is a. Equal to P(1 + 1/e) b. Equal to P when the price elasticity of demand is infinite. c. The increase in total revenue from selling one more unit of output.
d. All of the above. If the inverse demand curve a monopoly faces is p = 100 – 2Q, and MC is constant at 16, then profit maximization is achieved when the monopoly sets price equal to a. 16 b. 25 c. 21 d. 58 A monopolist that chooses price a. Operates according to the Harvard tradition rather than the Chicago tradition. b. Produces more than a monopolist that chooses quantity, thus the irony of laws against price fixing. c. Necessarily produces less than a monopolist that chooses quantity, hence the laws against price fixing.
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