AP Micro - Monopolies

Front

When one or more unit is sold, the total revenue increases by the price at which the unit is sold. This is known as

Back

quantity effect

Answer explanation

The quantity effect refers to the increase in total revenue when one or more units are sold, as it directly correlates with the price at which each unit is sold. Thus, the correct answer is quantity effect.

Front

In order to sell the last unit, a monopolist must cut the market price on all units sold. This will decrease TR. This idea is known as the

Back

Price effect

Answer explanation

The price effect occurs when a monopolist lowers the price to sell an additional unit, resulting in reduced total revenue (TR) for all units sold. This is why the correct answer is the price effect.

Front

For a monopolist, Total Revenue is highest when

Back

Marginal Revenue is equal to zero

Answer explanation

For a monopolist, Total Revenue is maximized when Marginal Revenue is equal to zero. At this point, any additional unit sold does not increase total revenue, indicating the peak revenue level.

Front

To maximize profits, the monopolist will produce where

Back

MR=MC

Answer explanation

To maximize profits, a monopolist produces where marginal revenue (MR) equals marginal cost (MC). This is the point where the cost of producing an additional unit equals the revenue gained from it, ensuring maximum profit.

Front

The monopolist's profit-maximizing output is

Back

4

Answer explanation

The monopolist maximizes profit where marginal cost equals marginal revenue. At an output of 4, the monopolist achieves the highest profit, making this the correct choice. Outputs of 0, 8, and 10 do not maximize profit.

Front

The monopolist's total revenue equals

Back

$240

Answer explanation

The monopolist's total revenue is calculated by multiplying the price by the quantity sold. In this case, the total revenue is $240, making it the correct choice among the options provided.

Front

The monopolist's total cost equals

Back

$80

Answer explanation

The monopolist's total cost is $80, which reflects the expenses incurred in production. This amount is crucial for determining profitability and pricing strategies.

Front

The monopolist is earning a profit equal to

Back

$160

Answer explanation

The monopolist's profit is calculated as total revenue minus total cost. In this case, the profit is $160, which is the difference between the revenue generated and the costs incurred, making $160 the correct answer.

Front

Within the range of market demand, which of the following is consistent with the conditions of a natural monopoly? Long-run total cost decreases as output increases. Long-run average total cost remains constant as output increases. Long-run average total cost decreases as output increases. Marginal cost exceeds Average cost.

Back

Long-run average total cost decreases as output increases.

Answer explanation

A natural monopoly occurs when long-run average total cost decreases as output increases, allowing one firm to supply the entire market more efficiently than multiple firms. Thus, the correct choice is that long-run average total cost decreases as output increases.

Front

Which of the following is a source of monopoly power? Scarcity, Elasticity of demand, Barriers to entry, Low Profits

Back

Barriers to entry

Answer explanation

Barriers to entry are obstacles that prevent new competitors from easily entering a market, allowing existing firms to maintain monopoly power. Other options do not directly contribute to creating a monopoly.