Question

What is a single-price monopoly’s total economic profit at eleven units if it makes $10 per unit profit when it produces ten units of output, where the marginal revenue of the eleventh unit is $55 and the marginal cost is $60?

a.	$75	b.	$85
c.	$80	d.	$95

If a single-price monopolist is currently maximizing profits, what can be concluded?

a.	She is producing where marginal revenue equals average cost.	b.	She has reduced the difference between marginal revenue and marginal cost to zero.
c.	She is maximizing total revenue and marginal revenue.	d.	She is maximizing total revenue and minimizing total cost.

A monopolist’s rent-seeking activity does not involve the cost of hiring _________.

a.	corporate lawyers	b.	labor union
c.	lobbyists	d.	researchers

Which of the following is a reason why a closed monopoly experiences high costs and inefficiency?

a.	It sells an inferior good.	b.	It is unable to secure sufficient resources.
c.	It pays too much for labor.	d.	It has the additional costs of rent seeking.

Answer 1

1. Given:

Profit at eleven units = 10 * 10 = $100

Marginal Revenue at eleven units = $55

Marginal Cost at eleven units = $60

Since, Profit = Marginal Revenue - Marginal Cost

= $55 - $60

= -$5

So, The Total Profit at eleven units = (100 + (-5)) = $95

2.

d.	She is maximizing total revenue and minimizing total cost.

By and large, on the off chance that a firm creates an item without close substitutes, at that point the firm can be viewed as a syndication maker in a solitary market. Be that as it may, if purchasers have a scope of comparative—regardless of whether not indistinguishable—alternatives accessible from different firms, at that point the firm isn't a restraining infrastructure. In any case, contentions about whether substitutes are close or not close can be questionable.

3.

b.	labor union

Rent seeking is a financial idea that happens when a substance tries to pick up added abundance with no complementary commitment of profitability. Regularly, it rotates around government-financed social administrations and social help programs.

4.

d.It has the additional costs of rent seeking.

In a monopoly, the firm will set a particular cost for a decent that is accessible to all purchasers. The amount of the kindness be less and the cost will be higher (this is the thing that makes the great an item). The monopoly evaluating makes a deadweight misfortune on the grounds that the firm does without exchanges with the customers. The deadweight misfortune is the potential picks up that didn't go to the maker or the shopper. Because of the deadweight misfortune, the consolidated excess (abundance) of the monopoly and the customers is not as much as that acquired by purchasers in a serious market. A monopoly is less proficient in all out increases from exchange than a serious market.