Question

1. (This question refers to the MRU video 'Maximizing Profit under Monopoly'.) How does a monopolist maximize profit?

a. By producing at the level of output where price equals average cost.

b. By producing at the level of output where price equals marginal revenue.

c. By producing at the level of output where marginal cost equals price.

d. By producing at the level of output where marginal revenue equals marginal cost.

2. The median voter is the person/voter who is exactly in the middle of the population, when one is counting the population in numbers.

true or false?

3. (This question refers to the MRU video 'Minimization of Total Industry Costs of Productions'.) Different farmers will make production decisions that lead to equal marginal costs across their different farms because:

a. each will independently produce where average cost equals marginal cost.

b. each will independently produce the same quantity of output.

c. each will independently produce the same quantity of output and charge the same price for their output.

d. each will independently produce where price equals marginal cost.

4. (This question refers to the MRU video 'The Monopoly Markup'.) Which of the following is correct?

a. The more elastic supply is, the greater the monopoly markup is.

b. The less elastic demand is, the greater the monopoly markup is.

c. The more elastic demand is, the greater the monopoly markup is.

d. The less elastic supply is, the greater the monopoly markup is.

5. Figure: Music and Movie Downloads 5

Reference: Ref 25-15

(Figure: Music and Movie Downloads 5) Refer to the figure. The consumer in this diagram is initially optimizing consumption at point A than moves to point B. The income effect of the price change causes the consumer to:

a. increase the number of music downloads by 3.

b. increase the number of music downloads by 4.

c. reduce the number of music downloads by 3.

d. reduce the number of music downloads by 1.

Answer 1

1. Option D

The profit-maximizing choice for the monopoly will be to produce at the quantity where marginal revenue is equal to marginal cost: that is, MR = MC. If the monopoly produces a lower quantity, then MR > MC at those levels of output, and the firm can make higher profits by expanding output.

2.True

There is a dynamic that pushes politicians to embrace the preferences of the typical or “median” voter, who sits squarely in the middle of public opinion. A significant move to either the left or the right would open the door for a rival to take a more moderate stance, win the next election and change the agenda.When it comes to the big issues, voters at the midpoint usually get the policies, if not always the exact outcomes, they want.

3. Option D

When P= MC it describes that firm is competitive and profit maximizing.

4.Option B

A monopoly seller would like to charge a higher markup over marginal cost to customers with less elastic demand than to customers with more elastic demand as this will provide him with higher profits.

The effects of monopoly are related to the elasticity of demand. If demand is very elastic, the effect of monopoly on prices is quite limited. In contrast, if the demand is relatively inelastic, monopolies will increase prices by a large margin.