13Which of the following statements regarding a monopolist is false? The margina
ID: 1155615 • Letter: 1
Question
13Which of the following statements regarding a monopolist is false?
The marginal revenue curve lies below the demand curve for the monopolist's output.
Unlike a perfectly competitive firm, a monopolist faces little or no competition.
The monopolist sets price equal to marginal cost to maximize profits.
The monopolist may or may not earn positive economic profits.
14Assume that when price is $20, quantity demanded is 9 units, and when price is $19, quantity demanded is 10 units. Based on this information, what is the marginal revenue resulting from an increase in output from 9 units to 10 units?
$20
$19
$10
$1
15Assume that for a particular firm's output price = $80, marginal cost = $30, average total cost = $25. Based on this information, the firm's Lerner Index is equal to:
0.313
0.375
0.6
0.625
16 Suppose a monopolist is producing a level of output such that MR > MC. What should the firm do to maximize its profits?
The firm should do nothing — it wants to maximize the difference between MR and MC in order to maximize its profits.
The firm should hire less labor.
The firm should increase price.
The firm should increase output.
The marginal revenue curve lies below the demand curve for the monopolist's output.
Unlike a perfectly competitive firm, a monopolist faces little or no competition.
The monopolist sets price equal to marginal cost to maximize profits.
The monopolist may or may not earn positive economic profits.
Explanation / Answer
13) Ans is c. Monopolist maximises profit at a quantity where MR=MC but price is always greater than marginal cost.
14)TR=P*Q=20*9=180 when Q=9
And TR=19*10=190 when Q=10
Thus Marginal revenue=change in TR/change in Q=190-180=10
15)lerner index=P-Mc/P=80-30/80=0.6
16) ans is D
Because profit is maximised when MR=MC.
Thus as we increases Q, MC increases and MR decreases, finally leading the equality of MR=MC
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