Question

1) If a firm's production process exhibits increasing returns to scale, then doubling all the firm's inputs will lead output to _____.

a) double.b) more than double.c) less than double.d) fall by one-half.

2) For all firms, the additional revenue collected from the sale of one additional unit of output is termed:

a) price. b) average revenue. c) marginal profit. d) marginal revenue.

3) For perfectly competitive firms, marginal revenue ______ price; for monopolists marginal revenue ______ price.
a) equals; equals b) equals; is greater than c) is less than; equals d) equals; is less than

4)Suppose the table below describes the demand for a good produced by monopolist.

 Price Quantity \$10 1 \$9 2 \$8 3 \$7 4 \$6 5 \$5 6 \$4 7

The total revenue from selling 6 units is ______, and the marginal revenue of selling the 6th unit is ______.

a) \$5; 5b) \$30; 0c) \$24; \$5

d) \$30; \$1

5) Suppose the table below describes the demand for a good produced by monopolist.

 Price Quantity \$10 1 \$9 2 \$8 3 \$7 4 \$6 5 \$5 6 \$4 7

The monopolist's marginal revenue from selling the 4th unit of output is less than \$7 because:

a) marginal cost is greater than \$3. b) the consumer only pays \$4 for the 4th unit. c) it has to charge \$1 less for each of the first 3 units of output. d) demand is perfectly elastic.

6)If the demand curve facing a monopolist shifts, then the monopolist's:

a) marginal revenue curve and profit-maximizing level of output will change. b) marginal revenue curve will not change, but its profit-maximizing level of output will. c) total cost curve will change, but its variable cost curve will not. d) marginal revenue curve will change, but its profit-maximizing level of output will not.

7) If a monopolist's marginal revenue exceeds its marginal cost at its current level of output, then to maximize its profit the monopolist should:
a) do nothing. b) decrease output in order to increase the gap between marginal revenue and marginal cost. c) increase output until marginal revenue equals marginal cost. d) increase output until price equals marginal cost.

8)The reason economists consider monopoly to be socially undesirable is that monopolists:

a) earn too much economic profit. b) can charge any price they want. c) exploit the inelastic nature of demand. d) produce less than the socially optimal level of output.

9) Price discrimination means charging:
a) higher prices to women and minorities. b) different prices for different products because production costs are different. c) the same price to all buyers even if production costs are different. d) different prices to different buyers for essentially the same good or service.

10)Suppose Island Bikes, a profit-maximizing firm, is the only bike rental company in a small resort town. The marginal cost to Island Bikes of renting out a bike is \$3, and Island Bikes has no fixed costs. Each day Island Bikes has six potential customers, whose reservations prices are listed below.

 Customer Reservation Price(\$/Rental) A 22 B 16 C 12 D 8 E 6 F 4

If Island Bikes charges a single price to all of its customers, then how many bikes will it rent out each day?

a) 6 b) 5 c) 4 d) 3

11) Suppose Island Bikes, a profit-maximizing firm, is the only bike rental company in a small resort town. The marginal cost to Island Bikes of renting out a bike is \$3, and Island Bikes has no fixed costs. Each day Island Bikes has six potential customers, whose reservations prices are listed below.

 Customer Reservation Price(\$/Rental) A 22 B 16 C 12 D 8 E 6 F 4

Suppose Island Bikes knows that customers whose reservation prices are at least \$10 always rent bikes before noon, while those whose reservation prices are below \$10 never do so. If Island bikes can charge a different price in the morning and in the afternoon, then in the morning, it will rent out ______ bike(s) and charge ______ per bike.

a) 1; \$22 b) 2; \$16 c) 3; \$12 d) 4; \$8

12) Suppose Island Bikes, a profit-maximizing firm, is the only bike rental company in a small resort town. The marginal cost to Island Bikes of renting out a bike is \$3, and Island Bikes has no fixed costs. Each day Island Bikes has six potential customers, whose reservations prices are listed below.

 Customer Reservation Price(\$/Rental) A 22 B 16 C 12 D 8 E 6 F 4

Suppose Island Bikes knows that customers whose reservation prices are at least \$10 always rent bikes before noon, while those whose reservation prices are below \$10 never do so. If Island bikes can charge a different price in the morning and in the afternoon, then in the afternoon, it will rent out ______ bike(s) and charge ______ per bike.

a) 1; \$8 b) 2; \$6 c) 3; \$4 d) 5; \$10

13) Relative to a single price monopolist, a price discriminating monopolist generates:

a) less total surplus. b) more total surplus. c) the same amount of total surplus, but lower profits. d) the same amount of total surplus, but higher profits.