Chapter 9 Practice Quiz KEY PDF

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Prof Wendy Doell...

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1. May is a wholesale noodle distributor. She sells her noodles to all the Chinese restaurants in Chinatown. She uses a very special recipe to make the noodles and nobody can make it the same way. Consequently, May is the only firm that sells noodles to all the Chinese restaurants. Assuming that May is maximizing her profit, how will noodle prices compare with marginal cost? a. prices will fluctuate around the marginal cost b. prices will be less than marginal cost. *c. prices will exceed marginal cost. d. prices will equal marginal cost.

2. If the North American newsprint paper market has barriers to entry, then ________ a. surviving firms earn only a normal level of profit in run. b. the entry of new firms will eventually cause price to *c. entry will be blocked even if firms are earning high d. abnormally high profits will attract the entry of new

the long decline. profits. firms.

3. Why does inefficiency arise from a monopoly? a. Some sellers will deny from selling the good due to the low price. b. The monopoly firm earns an excessively high profit. *c. Some buyers will be denied from buying the good due to the high price. d. Buyers who afford to buy the goods feel cheated.

4. Refer to figure 9.2. The figure shows the average cost curve, demand curve, and marginal revenue curve for a monopolist. After maximizing profits, what do the firm’s costs equal? a. $200

*b. $800 c. $1000 d. $2000

5. The profit-maximizing price charged for goods produced is $160. The marginal-revenue and marginal-cost curves intersect at output 100 units and marginal cost is $80. Average total cost for 100 units of output is $60. What is the monopolist’s profit under this situation? *a. $10,000 b. $8,000 c. $6,000 d. $16,000...