Question

1. The theory of monopoly assumes that the monopoly firm

faces a downward-sloping supply curve that is the same as its marginal revenue curve.

faces a downward-sloping demand curve.

produces more than the perfectly competitive firm under identical demand and cost conditions.

produces a product for which there are many close substitutes.

none of the above

2. A single-price monopolist is a monopolist that sells each unit of its output for the same price to all its customers. Assume that a single-price monopolist sets its price for good X at $75 and is selling more than one unit of good X. Which of the following must be true?

The average cost of that unit must be $75.

The marginal cost of that unit must be $75.

The marginal revenue of that unit must be $75.

The marginal revenue of that unit must be less than $75

3. A single-price monopolist is a firm that sell each unit of its output for the same price to all its customers. At the level of output at which a single-price monopolist maximizes profit, price is

equal to marginal cost.

equal to marginal revenue.

greater than marginal cost.

less than marginal cost.

less than marginal revenue.

Answer 1

1.

faces a downward-sloping demand curve.

Explanation :

Monopoly is price maker. It has market power ao it may charge whatever they want. So if he charge higher quantity demanded will decreases. So it faces downward sloping demand curve.

2.

The marginal revenue of that unit must be less than $75

Explanation:

Monopolist faces downward sloping demand curve and marginal revenue curve is below the demand curve. Firm charge price on demand curve above where MR equals MC. So always marginal revenue is lower than price.

3.

greater than marginal cost.

Explanation :

Firm maximises it's profit where MR equals MC. MR curve is below the demand curve. So MC is below price. And price is greater than MC.