Unit 4 Exam

Assume that the market is a profit-maximizing monopoly.

Which of the following areas shows the consumer surplus?

• A P0 E

• A P1 B

• A F E

• B J E

• P0 F E

The following question refer to the monopoly graph below, where MC = marginal cost, ATC = average total cost, D = demand, and MR = marginal revenue.

If the monopolist could engage in perfect price discrimination, the monopolist’s total output and the price charged for the last unit of output sold would be

• Q1 and P1

• Q1 and P2

• Q1 and P4

• Q2 and P3

• Q3 and P2

The following question refer to the monopoly graph below, where MC = marginal cost, ATC = average total cost, D = demand, and MR = marginal revenue.

The profit-maximizing combination of output and price for a single-price monopoly is

• Q1 and P1

• Q1 and P2

• Q1 and P4

• Q2 and P3

• Q3 and P2

The following questions refer to the diagram below, which shows the cost and revenue conditions of a monopolist.

If the monopolist chooses to maximize total revenue rather than total profit, it will choose which combination of price and output?

• P1 and Q5

• P2 and Q4

• P3 and Q3

• P4 and Q4

• P5 and Q5

In the diagram above, the deadweight loss from a profit-maximizing monopolist is represented by area

• FGK

• FHI

• IJK

• GHIK

• 0HIQ

The economic profit of the profit-maximizing monopolist is given by the area

• RULI

• RSJI

• R0Q1I

• RVNI

• U0Q4M

The firm’s economic profit is equal to

• area 0 P3 J Q1

• area 0 P2 K Q1

• zero

• area P1 P3 JL

• area P2 P3 J K

The firm’s total revenue is equal to

• area P1P2KL

• area 0P3JQ1

• area 0P2KQ1

• area P1P3JL

• area JLM

The graph shows the cost and revenue curves for a profit-maximizing firm. Which of the following is true about the firm?

• The firm operates in an imperfectly competitive market, producing

  Q1 and earning positive economic profit.

• The firm operates in a perfectly competitive market, producing the allocatively efficient quantity and charging

  P1.

• The firm is a monopolist, producing the allocatively efficient quantity and charging

  P1

• The firm is a natural monopoly, producing Q1

  and earning positive economic profit.

• The firm operates in a monopolistically competitive market, producing Q1 and earning negative economic profit.

The Question refers to the following graph, which shows the cost and revenue curves for a profit-maximizing monopolistically competitive firm.

Is the firm in short-run or long-run equilibrium?

• Short run, because price is greater than marginal cost

• Short run, because the firm is earning a positive economic profit

• Long run, because price is greater than average total cost

• Long run, because marginal revenue is not equal to zero

• Either short run or long run, because the firm is producing where marginal revenue equals marginal cost