Question

1.

Which of the following is true about the output level where marginal revenue equals marginal cost?

Group of answer choices

The firm is maximizing profit.

Economic profits are equal to zero.

The firm should reduce its output.

The firm should increase its output.

2.

The price charged by a profit-maximizing monopolist occurs

Group of answer choices

At the minimum of the long-run average total cost curve.

Where P = MR = MC.

At a price on the demand curve above the intersection where MR = MC.

At a price on the long-run average total cost curve below the point where MR = MC.

3.

Which of the following is likely to occur if a monopoly suddenly loses its ability to deny potential competitors entry into the market?

Group of answer choices

Profits for the market will increase.

The industry demand curve for the product will shift.

The total market quantity of output produced will fall.

The market price of the product will fall.

4.

Which of the following is the same for monopoly and competition under the same cost and demand conditions?

Group of answer choices

The amount of output that is produced.

The goal of maximizing profits.

Economic profits.

Efficiency of production at the profit-maximizing output.

5.

A monopolist will find that its marginal revenue curve

Group of answer choices

Lies below its demand curve and is steeper than its demand curve.

Is the same as its demand curve.

Lies above its demand curve and is flatter than its demand curve.

Lies below its demand curve and has the same slope as its demand curve.

Answer 1

1. Option A.

• At an output level where marginal revenue equals marginal cost, the firm is maximizing it's profits.
• This is called the profit maximizing condition of a firm at Which it is said to maximize its profits.

2. Option C.

• The price charged by a profit maximizing monopolist occurs at a price on the demand curve above the intersection where,. MR = MC.
• A profit maximizing monopolist always aims at maximizing their profits, hence they charge higher prices which is always above the profit maximizing point in the curve.

3. Option D.

• If the monopoly firm suddenly loses its ability to deny potential competitors into the market, then the market price of the product will fall.
• A monopoly is considered as a price maker as it can influence the market prices in the absence of competitor's.
• But if it loses the ability to deny these competitors into the market, then it will no longer be able to charge higher prices and hence the market price will fall.

4. Option B.

• The goal of maximizing profits is same for both monopoly and competition under same cost and demand conditions.
• Both of them try to produce an output quantity at a point where the MR equals the MC.

5. Option A.

• A monopolist will find its marginal revenue curve lies below it's demand curve and is steeper than its demand curve.
• This is below a monopolist charges very high prices for its goods and services due which they earn fewer revenue's even when the demand is high.