CH 10 CONCEPT CHECK QUIZ_ 2023 Fall Principles of Microeconomics _602_

pdf

School

East Carolina University *

*We aren’t endorsed by this school

Course

2113

Subject

Economics

Date

Apr 3, 2024

Type

pdf

Pages

Uploaded by JusticeWillpowerScorpion62

11/1/23, 1:10 PM CH 10 CONCEPT CHECK QUIZ: 2023 Fall Principles of Microeconomics *602* https://ecu.instructure.com/courses/115447/quizzes/436928 1/12 CH 10 CONCEPT CHECK QUIZ Due Nov 1 at 11:59pm Points 15 Questions 15 Time Limit None Allowed Attempts Unlimited Attempt History Attempt Time Score LATEST Attempt 1 12 minutes 13 out of 15  Correct answers are hidden. Score for this attempt: 13 out of 15 Submitted Nov 1 at 1:09pm This attempt took 12 minutes. Take the Quiz Again 1 / 1 pts Question 1 A natural monopoly exists when a single seller experiences __________ average total costs compared with any potential competitor. higher lower equal sometimes higher and sometimes lower

11/1/23, 1:10 PM CH 10 CONCEPT CHECK QUIZ: 2023 Fall Principles of Microeconomics *602* https://ecu.instructure.com/courses/115447/quizzes/436928 2/12 FEEDBACK: In an industry that has large economies of scale, production costs per unit continue to fall as the firm expands. Smaller rivals will have much higher average costs that prevent them from competing with a larger company. As a result, firms in the industry naturally tend to combine over time. This leads to the creation of a natural monopoly, which occurs when a single large firm has lower costs than any potential competitor. 1 / 1 pts Question 2 Assume that a monopolist faces the demand schedule given below, and a constant marginal cost of $2 for each unit of output. To maximize profits, this monopolist would produce what number of units of output and charge what price per unit? Price Quantity demanded $10 0 $8 1 $5 2 $3 3 $1 4 1 unit; $8 2 units; $5 3 units; $3 4 units; $1

11/1/23, 1:10 PM CH 10 CONCEPT CHECK QUIZ: 2023 Fall Principles of Microeconomics *602* https://ecu.instructure.com/courses/115447/quizzes/436928 3/12 FEEDBACK: This question requires several steps to answer. First, you need to remember that a monopolist maximizes profit where marginal revenue equals marginal cost. Marginal cost is given as $2 per unit, so this is marginal revenue you need to find. However, neither marginal revenue nor total revenue is given in this table. You will need to calculate these values using the total revenue and marginal revenue formulas. Begin by calculating total revenue, using the following equation: Price × quantity = total revenue Next, plug the appropriate values into the TR formula: $10 × 0 units = TR $8 × 1 unit = TR $5 × 2 units = TR $3 × 3 units = TR $1 × 4 units = TR Now solve for TR, which gives you the following: Price Quantity demanded Total revenue 10 0 0 8 1 8 5 2 10 3 3 9 1 4 4 Next, you need to calculate marginal revenue. To find marginal revenue, you need to calculate the difference in total revenue from selling one more unit of a good. Use the following equation: TR unit - TR units = MR unit Next, plug the appropriate values into the MR formula: $8 - $0 = MR1 unit $10 - $8 = MR2 units $9 - $8 = MR3 units $4 - $9 = MR4 units Now solve for MR, which gives you the following: Price Quantity demanded Total revenue Marginal revenue 10 0 0 - 8 1 8 8 5 2 10 2 1 0 1

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

11/1/23, 1:10 PM CH 10 CONCEPT CHECK QUIZ: 2023 Fall Principles of Microeconomics *602* https://ecu.instructure.com/courses/115447/quizzes/436928 4/12 5 2 10 2 3 3 9 -1 1 4 4 -5 We know that the profit-maximizing price and output level is found where MR = MC. Since MC is $2, we know the firm will maximize profit where MR is $2. Using this profit-maximizing condition, it produces two units at a price of $5 per unit. 1 / 1 pts Question 3 Assume that a monopolist faces the demand schedule given in columns (1) and (2) of the table, and a constant marginal cost of $50 for each additional customer. To maximize profits, the monopolist would serve __________ customers at a price of __________ per head. Click to view larger image. (https://services.wwnorton.com/aws/image? u=0&file=/wwnorton.college.public/coursepacks/econ/prinecon3/imgs/CP_Table 5,000; $50 4,000; $60

11/1/23, 1:10 PM CH 10 CONCEPT CHECK QUIZ: 2023 Fall Principles of Microeconomics *602* https://ecu.instructure.com/courses/115447/quizzes/436928 5/12 3,000; $70 2,000; $80 FEEDBACK: This question requires several steps to answer. First, you need to know that the monopolist's profit-maximizing decision occurs where marginal revenue is equal to marginal cost. Marginal cost is given as $50 per unit. Therefore, you need to find a marginal revenue of $50 in column 4 of the table. However, because marginal revenue is reported for every 1,000 customers, you need to find a marginal revenue of $50 × 1,000 = $50,000. This occurs where 3,000 customers are served at $70 each. 1 / 1 pts Question 4 Compared to perfect competition, monopolies charge a lower price. a higher price. the same price. a higher or lower price, depending on the monopoly. FEEDBACK: A monopolist uses MR = MC to determine its price and quantity, but that does not set price equal to marginal cost. Instead, a monopolist sets its price by the height of the demand curve at the profit- maximizing output level. This is a higher price than that charged in competitive markets. 1 / 1 pts Question 5

11/1/23, 1:10 PM CH 10 CONCEPT CHECK QUIZ: 2023 Fall Principles of Microeconomics *602* https://ecu.instructure.com/courses/115447/quizzes/436928 6/12 Compared to perfect competition, monopoly results in fewer units produced and sold. more units produced and sold. the same number of units produced and sold. fewer, more, or the same number of units, depending on the monopoly. FEEDBACK: The monopolist uses MR = MC to determine its price and quantity. This means that a monopoly produces a smaller output than an industry populated with competitive firms. 1 / 1 pts Question 6 In order to sell more units, a monopolist must lower its prices. As shown in the table, total revenue will initially __________ and then __________. Click to view larger image. (https://services.wwnorton.com/aws/image? u=0&file=/wwnorton.college.public/coursepacks/econ/prinecon3/imgs/CP_Table

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

11/1/23, 1:10 PM CH 10 CONCEPT CHECK QUIZ: 2023 Fall Principles of Microeconomics *602* https://ecu.instructure.com/courses/115447/quizzes/436928 7/12 increase; continue to increase decrease; continue to decrease increase; decrease decrease; increase FEEDBACK: As the table shows, total revenue is calculated by multiplying output by price. At first total revenue rises as the price falls. Once the price becomes too low, total revenue begins to fall. 1 / 1 pts Question 7 In the figure, where does a monopoly operate to maximize profits? Click to view larger image. (https://services.wwnorton.com/aws/image? u=0&file=/wwnorton.college.public/coursepacks/econ/prinecon3/imgs/CP_Fig_1 where MR = MC

11/1/23, 1:10 PM CH 10 CONCEPT CHECK QUIZ: 2023 Fall Principles of Microeconomics *602* https://ecu.instructure.com/courses/115447/quizzes/436928 8/12 where MR > MC where MR < MC either where MR > MC or MR < MC FEEDBACK: Profit maximization occurs when a firm expands output until marginal revenue is equal to marginal cost: MR = MC. If MR > MC, the monopolist could increase production and increase profit. If MR < MC, the monopolist could decrease production and increase profit. 1 / 1 pts Question 8 Microsoft likely has to spend billions of dollars building and developing an operating system, but once it is produced, the cost to get the software to each customer is almost zero. Therefore, when Microsoft sells more units, their average total costs steadily decrease. This means Microsoft is said to have __________. economies of scale constant returns to scale diseconomies of scale negative externalities FEEDBACK: Because the average total cost for Microsoft is always decreasing, Microsoft is said to enjoy economies of scale. 1 / 1 pts Question 9

11/1/23, 1:10 PM CH 10 CONCEPT CHECK QUIZ: 2023 Fall Principles of Microeconomics *602* https://ecu.instructure.com/courses/115447/quizzes/436928 9/12 Monopolies choose their profit maximizing output level. price. output level and price. neither output level nor price. FEEDBACK: Monopolies are price makers. A price maker has some control over the price it charges. Since the demand curve for a monopolist is the market demand curve, there are many possible price-output pairs for it to choose from. A monopolist chooses the combination of price and output level that maximizes its profits. 1 / 1 pts Question 10 Monopoly power measures the ability to set a good's price. output level. quality. demand. FEEDBACK: The effect of limited competition in a monopoly creates monopoly power, which measures the ability of firms to set the price for a good.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

11/1/23, 1:10 PM CH 10 CONCEPT CHECK QUIZ: 2023 Fall Principles of Microeconomics *602* https://ecu.instructure.com/courses/115447/quizzes/436928 10/12 0 / 1 pts Question 11 Incorrect Incorrect Over the long run, a monopolist cannot continue to make profits and will earn a loss. can continue to make economic profits if it can maintain a monopoly and keep competitors from entering the market. will not make a profit or a loss but will operate at zero economic profit. will always face government regulation. FEEDBACK: Unlike firms in a perfectly competitive market, monopolies can sustain long-run profits through barriers to entry. Should barriers to entry no longer exist, competitors could enter the market and monopolies would no longer be able to sustain long-run profits. In order to earn long-run economic profits, other firms must be prevented from entering the market. 1 / 1 pts Question 12 Suppose that at the current level of production, the price of a monopolist's product is equal to $15 per unit. Marginal revenue is equal to $10 per unit, and marginal cost is equal to $15 per unit. This monopoly has maximized profit and should keep production the same. can increase its profit by producing and selling more units of its product. can increase its profit by producing and selling fewer units of its product. should shut down.

11/1/23, 1:10 PM CH 10 CONCEPT CHECK QUIZ: 2023 Fall Principles of Microeconomics *602* https://ecu.instructure.com/courses/115447/quizzes/436928 11/12 FEEDBACK: Monopolies maximize profit where marginal revenue is equal to marginal cost. When marginal cost exceeds marginal revenue, the firm can increase profits by reducing output until marginal revenue is equal to marginal cost. 1 / 1 pts Question 13 Suppose there were only one producer of an expensive heart medication. The source of that producer's monopoly would MOST likely come from economies of scale. advertising. reputation. a patent to produce the drug. FEEDBACK: Patents and copyrights create stronger incentives to develop new drugs than would exist if market competitors could immediately copy the newly invented drugs. As a result, pharmaceutical companies invest heavily in developing new drugs. 0 / 1 pts Question 14 Incorrect Incorrect Which of the following is considered a government-created barrier? control of resources problems in raising capital

11/1/23, 1:10 PM CH 10 CONCEPT CHECK QUIZ: 2023 Fall Principles of Microeconomics *602* https://ecu.instructure.com/courses/115447/quizzes/436928 12/12 economies of scale licensing FEEDBACK: Barriers may restrict the entry of new firms into a market. Some barriers exist naturally within the market. These include control of resources, problems in raising capital, and economies of scale. Licensing and patent and copyright law are government-created barriers. 1 / 1 pts Question 15 Which of the following is true regarding monopolies? They tend to engage in rent seeking. Monopolies produce more output than would otherwise be produced in a perfectly competitive market. They provide an efficient outcome. They provide more choice than a perfectly competitive market. FEEDBACK: From an efficiency standpoint, a monopolist charges too much and produces too little. The prospect of long-term economic profits encourages rent seeking, which is the use of resources to secure monopoly right through the political process. Since monopolies restrict their output, they create deadweight loss. Quiz Score: 13 out of 15

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

CH 10 CONCEPT CHECK QUIZ_ 2023 Fall Principles of Microeconomics _602_

Related Documents