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Exam 12: Managerial Decisions for Firms With Market Power

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Question 21

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A monopolistic competitor is currently producing 2,000 units of output; price is $100,marginal revenue is $80,average total cost is $130,marginal cost is $60,and average variable cost is $60.The firm should

A) raise price because the firm is losing money.
B) keep the price the same because the firm is producing at minimum average variable cost.
C) raise price because the last unit of output decreased profit by $30.
D) lower price because the next unit of output increases profit by $20.

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Question 22

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The market demand for a monopoly firm is estimated to be: $Q _ { d } = 100,000 - 500 P + 2 M + 5000 P _ { R }$ where $Q _ { d }$ is quantity demanded,P is price,M is income,and $P _ { R }$ is the price of a related good.The manager has forecasted the values of M and $P _ { R }$ will be $50,000 and $20,respectively,in 2021.The average variable cost function is estimated to be $A V C = 520 - 0.03 Q + 0.000001 Q ^ { 2 }$ Total fixed cost in 2021is expected to be $4 million.The manager should ________________ because_____________.

A) shut down; P = $520 < TVC = $320
B) shut down; P = $480 < AVC = $500
C) operate; P = $560 > AVC = $320
D) operate; P = 480 > AVC = $300

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Question 23

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The inverse demand equation for a monopoly firm is P = 60 - 0.015Q.The monopolist faces constant costs of production in the long run with LAC = LMC = $30.At the profit-maximizing price,the elasticity of demand is ________,which is __________ (elastic,inelastic,unit elastic) as expected.

A monopolist which suffers losses in the short run will

Refer to the following table that gives the demand facing a monopolist: $\begin{array} { c c } \text { Price } & \text { Quartity } \\\hline \$ 20 & 20 \\15 & 40 \\10 & 65 \\5 & 70\end{array}$ How much does the 28th unit of output add to total revenue?

A monopolist

A radio manufacturer has two plants -- one in Taiwan and one in California.At the current allocation of total output between the two plants,the last unit of output produced in the Taiwan plant added $8 to total cost,while the last unit of output produced in the California plant added $6 to total cost.If the firm switches one unit of output from the California to the Taiwan plant,then

A price-setting firm faces the following estimated demand and average variable cost functions: $Q _ { d } = 800,000 - 2,000 P + 0.7 M + 4,000 P _ { R }$ $A V C = 500 - 0.03 Q + 0.000001 Q ^ { 2 }$ where $Q _ { d }$ is the quantity demanded,P is price,M is income,and $P _ { R }$ is the price of a related good.The firm expects income to be $40,000 and $P _ { R }$ to be $53.Total fixed cost is $2,600,000.What is the firm's profit?

Which of the following is true of a monopolist in the long run?

A firm facing a downward sloping demand curve is producing a level of output at which price is $7,marginal revenue is $5,and average total cost,which is at its minimum value,is $3.In order to maximize profit,the firm should

The market demand for a monopoly firm is estimated to be: $Q _ { d } = 100,000 - 500 P + 2 M + 5000 P _ { R }$ where $Q _ { d }$ is quantity demanded,P is price,M is income,and $P _ { R }$ is the price of a related good.The manager has forecasted the values of M and $P _ { R }$ will be $50,000 and $20,respectively,in 2021.The average variable cost function is estimated to be $A V C = 520 - 0.03 Q + 0.000001 Q ^ { 2 }$ Total fixed cost in 2021is expected to be $4 million.The firm's profit is

The above graph shows the demand and cost conditions facing a price-setting firm. What is the maximum amount of profit the firm can earn?

In order to maximize profit,a firm that produces its output in two plants will produce the level of total output at which the last unit of output produced adds the same amount to total revenue as to the

If demand is estimated to be $Q _ { d }$ = 240 -6P,the marginal revenue function is

Using time-series data,the demand function for a profit-maximizing monopolist has been estimated as $Q _ { d } = 142,000 - 500 P + 6 M - 400 P _ { R }$ where $Q _ { d }$ is the amount sold,P is price,M is income,and $P _ { R }$ is the price of a related good.The estimated values for M and $P _ { R }$ in 2021are $25,000 and $200,respectively.The short-run marginal cost curve for this firm has been estimated as: $M C = 200 - 0.024 Q + 0.000006 Q ^ { 2 }$ Total fixed cost is forecast to be $500,000 in 2021.The firm's forecasted profit (loss) in 2021is

A monopolist will

Using time-series data,the demand function for a profit-maximizing monopolist has been estimated as $Q _ { d } = 142,000 - 500 P + 6 M - 400 P _ { R }$ where $Q _ { d }$ is the amount sold,P is price,M is income,and $P _ { R }$ is the price of a related good.The estimated values for M and $P _ { R }$ in 2021are $25,000 and $200,respectively.The short-run marginal cost curve for this firm has been estimated as: $M C = 200 - 0.024 Q + 0.000006 Q ^ { 2 }$ Total fixed cost is forecast to be $500,000 in 2021.The forecasted marginal revenue function for 2021is:

In a monopolistically competitive industry in long-run equilibrium

A manager of a firm with market power faces the marginal revenue product and average revenue product curves shown below.The firm incurs weekly fixed costs of $1,800.The firm employs a single variable input,labor,which costs $600 per worker each week. Given the above,the 14^th worker hired adds $_______ to the firm's total revenue each week.

The figure above shows the demand and cost curves facing a price-setting firm.In profit-maximizing (or loss-minimizing) equilibrium,the Lerner index is _____,and the elasticity of demand is ______.