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Exam 8: Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

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Question 51

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You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 78 - 15Q, where Q = Q₁ + Q₂. The marginal costs associated with producing in the two plants are MC₁ = 3Q₁ and MC₂ = 2Q₂. What price should be charged to maximize profits?

A) $20.5
B) $40.5
C) $60.5
D) $80.5

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Question 52

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You are a monopolist with the following cost and demand conditions: P = 100 - 2Q and C(Q) = 50 + Q². a. Determine the profit-maximizing output and price. b. Graph this solution. c. Show your profits and the deadweight loss to society in your graph. d. Determine the actual amount of deadweight loss.

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a. Equating MR and MC yields 100 - 4Q = ...

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Question 53

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Suppose that a monopolistically competitive market is at the long-run equilibrium. Based on this information, which of the following conclusions is NOT true?

What market can you think of, besides that for VCRs, that has shown short-run profits but, over time, has seen profits disappear due to entry?

You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 20 - Q, where Q = Q₁ + Q₂. The marginal costs associated with producing in the two plants are MC₁ = 2 and MC₂ = 2Q₂. How much output should be produced in plant 1 in order to maximize profits?

In a competitive industry with identical firms, long-run equilibrium is characterized by:

In a monopoly where the marginal revenue and price are, respectively, given by $10 and $20, the price elasticity of demand is:

Monsanto, the maker of Nutrasweet, owned the patent to aspartame, the official name of the sweetener. In 1987 Monsanto's patent expired in Europe, allowing other firms to produce aspartame under other brand names. What impact do you think this had on the market for aspartame and Monsanto's profits?

Consider a monopoly where the inverse demand for its product is given by P = 50 - 2Q. Total costs for this monopolist are estimated to be C(Q) = 100 + 2Q + Q². At the profit-maximizing combination of output and price, monopoly profit is:

You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 78 - 15Q, where Q = Q₁ + Q₂. The marginal costs associated with producing in the two plants are MC₁ = 3Q₁ and MC₂ = 2Q₂. What price should be charged in order to maximize revenues?

Which of the following is an example of monopoly?

The first-order conditions for profit maximization in a perfectly competitive market are:

Suppose a monopolist knows the own price elasticity of demand for its product is -3 and that its marginal cost of production is constant MC(Q) = 10. To maximize its profit, the monopoly price is:

Suppose perfectly competitive market conditions are characterized by the following inverse demand and inverse supply functions: P = 100 - 5Q and P = 10 + 5Q. The demand curve facing an individual firm operating in this market is:

Which of the following is true under monopoly?

You are the manager of a firm that sells its product in a competitive market with market (inverse) demand given by P = 50 - 0.5Q. The market equilibrium price is $50. Your firm's cost function is C = 40 + 5Q². Your firm's marginal revenue is:

There is a market supply curve in a:

In the long run, monopolistically competitive firms produce a level of output such that:

A monopoly has two production plants with cost functions C₁ = 50 + 0.1Q₁² and C₂ = 30 + 0.05Q₂². The demand it faces is Q = 500 - 10P. What is the profit-maximizing level of output?

Chris raises cows and produces cheese and milk because he enjoys: