1. Which of the following is true under a monopoly? 2. You are the manager of a

Question

1.  Which of the following is true under a monopoly?

2.  You are the manager of a monopoly that faces a demand curve described by P = 230 -20Q. Your costs are C = 5 +30Q. The profit-maximizing output for your firm is:

3.  Which of the following is true?

4.  In a competitive industry with identical firms, long rum equilibrium is characterized by:

5.  You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C = 40 + 5Q^2. Your firm's maximum profits are:

6.  A perfectly competitive firm faces:

Explanation / Answer

B. Monopolist chooses a price that is always higher than marginal cost of production.

MR=MC. P>MR, for a monopolist, P=MR in perfect competition

B. 5

Revenue = PQ = 230Q -20Q^2

Profit = Revenue-Cost = -20Q^2 + 200Q -5

dProfit/dQ =0 at Q=5

D. In the short run a monopoly will shutdown if P < AVC.

Revenue>Variable Cost, for a firm to contiue its operation

D. All of the above

D. 85

same method as explained above, only the value of Q to be substituted in the Profit function to get its value

A. A perfectly elastic demand function

Revenue = PQ
MR = P + Q*dP/dQ

MR = P(1+1/price elasticity)

P=MR in perfect competition, hence it is perfectly elastic

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