Quizlet-4 - Microeconomics PDF

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Int Microeconomics Thry Midterm 2 Chapter 25 Study online at quizlet.com/_6u3wp8 1.

$1

In a market with the inverse demand curve P = 10 − Q, Brand X is a monopolist with no fixed costs and with a marginal cost of $2. If marginal cost rises to $4, by how much will the price of Brand X rise?

2.

$3,200

A monopolist faces the demand curve q = 90 − p/2, where q is the number of units sold and p is the price in dollars. He has quasi-fixed costs, C, and constant marginal costs of $20 per unit of output. Therefore his total costs are C + 20q if q > 0 and 0 if q = 0. What is the largest value of C for which he would be willing to produce positive output?

3.

$3,200

A monopolist faces the demand curve q = 90 − p/2, where q is the number of units sold and p is the price in dollars. She has quasi-fixed costs, C, and constant marginal costs of $20 per unit of output. Therefore her total costs are C + 20q if q > 0 and 0 if q = 0. What is the largest value of C for which she would be willing to produce positive output?

9.

$160

An airline has exclusive landing rights at the local airport. The airline flies one flight per day to New York with a plane that has a seating capacity of 100. The cost of flying the plane per day is $4,000 + 10q, where q is the number of passengers. The number of flights to New York demanded is q = 165 − .5p. If the airline maximizes its monopoly profits, the difference between the marginal cost of flying an extra passenger and the amount the marginal passenger is willing to pay to fly to New York is

10.

-1.20

The demand for a monopolist's output is 6,000/(p + 2)2, where p is the price it charges. At a price of $3, the elasticity of demand for the monopolist's output is

11.

-1.60

The demand for a monopolist's output is 3,000/(p + 2)2, where p is the price it charges. At a price of $3, the elasticity of demand for the monopolist's output is

4.

$8

A profit-maximizing monopolist faces a downwardsloping demand curve that has a constant elasticity of −3. The firm finds it optimal to charge a price of $12 for its output. What is its marginal cost at this level of output?

12.

2 dollars

The demand for a monopolist's output is 7,000 divided by the square of the price in dollars that it charges per unit. The firm has constant marginal costs equal to 1 dollar per unit. To maximize its profits, it should charge a price of

5.

$15

The demand for a monopolist's output is 6,000/(p + 3)2, where p is its price. It has constant marginal costs equal to $6 per unit. What price will it charge to maximize its profits?

13.

5

6.

$17

The demand for a monopolist's output is 6,000/(p + 7)2, where p is its price. It has constant marginal costs equal to $5 per unit. What price will it charge to maximize its profits?

The demand curve facing a monopolist is D(p) = 100/p if p is 20 or smaller and D(p) = 0 if p > 20. The monopolist has a constant marginal cost of $1 per unit produced. What is the profit-maximizing quantity of output for this monopolist?

14.

10

A monopolist faces the inverse demand curve p = 120 − 6q. At what level of output is his total revenue maximized?

15.

16

A monopolist faces the inverse demand curve p = 64 − 2q. At what level of output is his total revenue maximized?

16.

18

Charlie can work as many hours as he wishes at a local fast-food restaurant for a wage of $4 per hour. Charlie also does standup comedy. Since Charlie lives in a quiet, rather solemn Midwestern town, he is the town's only comedian and has a local monopoly for standup comedy. The demand for comedy is Q = 40 − P, where Q is the number of hours of comedy performed per week and P is the price charged per hour of comedy. When Charlie maximizes his utility, he spends at least 1 hour per week working at the restaurant and he gets at least 1 hour of leisure time. His utility depends only on income and leisure. How many hours per week does he perform standup comedy?

7.

8.

$18

$20

A profit-maximizing monopolist faces a downwardsloping demand curve that has a constant elasticity of −4. The firm finds it optimal to charge a price of $24 for its output. What is its marginal cost at this level of output? The demand for a monopolist's output is 10,000 divided by the square of the price it charges. The monopolist produces at a constant marginal cost of $5. If the government imposes a sales tax of $10 per unit on the monopolist's output, the monopolist price will rise by

17.

20

A monopolist has constant marginal costs of $1 per unit. The demand for her output is 1,000/p if p is less than or equal to 50. The demand is 0 if p > 50. What is her profit maximizing level of output?

18.

23 10q

A monopolist faces the inverse demand function described by p = 23 − 5q, where q is output. The monopolist has no fixed cost and his marginal cost is $6 at all levels of output. Which of the following expresses the monopolist's profits as a function of his output?

19.

20.

21.

22.

25,000

26

38

45q 4q^2

A computer software firm has developed a new and better spreadsheet program. The program is protected by copyrights, so the firm can act as a monopolist for this product. The demand function for the spreadsheet is q = 50,000 − 100p. Any single consumer will want only one copy. The marginal cost of producing and distributing another copy and its documentation is just $10 per copy. If the company sells this software at the profit-maximizing monopoly price, the number of consumers who would not buy the software at the monopoly price but would be willing to pay at least the marginal cost is An industry has two firms, a leader and a follower. The demand curve for the industry's output is given by p = 208 − 4q, where q is total industry output. Each firm has zero marginal cost. The leader chooses his quantity first, knowing that the follower will observe the leader's choice and choose his quantity to maximize profits, given the quantity produced by the leader. The leader will choose an output of An industry has two firms, a leader and a follower. The demand curve for the industry's output is given by p = 456 − 6q, where q is total industry output. Each firm has zero marginal cost. The leader chooses his quantity first, knowing that the follower will observe the leader's choice and choose his quantity to maximize profits, given the quantity produced by the leader. The leader will choose an output of

23.

99 gallons

In some parts of the world, Red Lizzard Wine is alleged to increase one's longevity. It is produced by the process Q = min{(1/3)L, R}, where L is the number of spotted red lizards and R is gallons of rice wine. PL = PR = $1. Demand for Red Lizzard Wine in the United States is Q = 576P−2 A1/2. If the advertising budget is $121, the quantity of wine which should be imported into the United States is

24.

100%

A major software developer has estimated the demand for its new personal finance software package to be Q = 1,000,000P−2 while the total cost of the package is C = 100,000 + 25Q. If this firm wishes to maximize profit, what percentage markup should it place on this product?

25.

100%

The demand for copies of the software package Macrosoft Doors is given by Q = 10,000P−2. The cost to produce Doors is C = 100,000 + 5Q. If Macrosoft practices cost plus pricing, what would be the profit-maximizing markup?

26.

108 gallons

In some parts of the world, Red Lizzard Wine is alleged to increase one's longevity. It is produced by the process Q = min{(1/4)L, R}, where L is the number of spotted red lizards and R is gallons of rice wine. PL = PR = $1. Demand for Red Lizzard Wine in the United States is Q = 900P−2 A1/2. If the advertising budget is $144, the quantity of wine which should be imported into the United States is

27.

144

An obscure inventor in Strasburg, North Dakota, has a monopoly on a new beverage called Bubbles, which produces an unexplained craving for Lawrence Welk music. Bubbles is produced by the following process: Q = min{R/2, W}, where R is pulverized Lawrence Welk records and W is gallons of North Dakota well water. PR = PW = $1. Demand for Bubbles is Q = 576P−2A0.5. If the advertising budget for Bubbles is $81, the profit-maximizing quantity of Bubbles is

28.

160

An obscure inventor in Strasburg, North Dakota, has a monopoly on a new beverage called Bubbles, which produces an unexplained craving for Lawrence Welk music. Bubbles is produced by the following process: Q = min{R/3, W}, where R is pulverized Lawrence Welk records and W is gallons of North Dakota well water. PR = PW = $1. Demand for Bubbles is Q = 1,024P−2A0.5. If the advertising budget for Bubbles is $100, the profit-maximizing quantity of Bubbles is

29.

225

Peter Morgan sells pigeon pies from his pushcart in Central Park. Due to the abundant supplies of raw materials, his costs are zero. The demand schedule for his pigeon pies is p(y) = 150 − y/3. What level of output will maximize Peter's profits?

A monopolist faces the inverse demand function described by p = 50 − 4q, where q is output. The monopolist has no fixed cost and his marginal cost is $5 at all levels of output. Which of the following expresses the monopolist's profits as a function of his output?

30.

250%

A major software developer has estimated the demand for its new personal finance software package to be Q = 1,000,000P−1.40 while the total cost of the package is C = 100,000 + 20Q. If this firm wishes to maximize profit, what percentage markup should it place on this product?

31.

average total cost is greater than marginal cost

A monopolist faces a downward-sloping demand curve and has fixed costs so large that when she maximizes profits with a positive amount of output, she earns exactly zero profits. At this positive, profit-maximizing output,

decrease her price by $5

A profit-maximizing monopolist faces a demand function given by q = 1000 − 20p, where p is the price of her output in dollars. She has a constant marginal cost of 20 dollars per unit of output. In an effort to induce her to increase her output, the government agrees to pay her a subsidy of $10 for every unit that she produces. She will

32.

33.

34.

decrease her price by $20

A profit-maximizing monopolist has the cost schedule c(y) = 20y. The demand for her product is given by y = 600/p4, where p is her price. Suppose that the government tries to get her to increase her output by giving her a subsidy of $15 for every unit that she sells. Giving her the subsidy would make her

decrease her price by $28

A profit-maximizing monopolist has the cost schedule c(y) = 40y. The demand for her product is given by y = 600/p4, where p is her price. Suppose that the government tries to get her to increase her output by giving her a subsidy of $21 for every unit that she sells. Giving her the subsidy would make her

35.

decrease his output

A monopolist produces at a point where the price elasticity of demand is −0.7 and the marginal cost is $2. If you were hired to advise this monopolist on how to increase his profits, you would find that the way to increase his profits is to

36.

the firm could produce either 5 units or 35 units

A natural monopolist has the total cost function c(q) = 350 + 20q, where q is its output. The inverse demand function for the monopolist's product is p = 100 − 2q. Government regulations require this firm to produce a positive amount and to set price equal to average costs. To comply with these requirements

37.

The firm produce zwiffle only if F is less than or equal to 36

A firm has discovered a new kind of nonfattening, non-habit-forming dessert called zwiffle. It doesn't taste very good, but some people like it and it can be produced from old newspapers at zero marginal cost. Before any zwiffle could be produced, the firm would have to spend a fixed cost of $F. Demand for zwiffle is given by the equation q = 12 − p. The firm has a patent on zwiffle, so it can have a monopoly in this market.

38.

the firm will lose $750

A monopolist has the total cost function c(q) = 750 + 5q. The inverse demand function is 140 − 7q, where prices and costs are measured in dollars. If the firm is required by law to meet demand at a price equal to its marginal costs,

39.

the firm will lose $800

A monopolist has the total cost function c(q) = 800 + 8q. The inverse demand function is 80 − 6q, where prices and costs are measured in dollars. If the firm is required by law to meet demand at a price equal to its marginal costs,

40.

The firm will produce zwiffle only if F is less than or equal to 100

A firm has discovered a new kind of nonfattening, non-habit-forming dessert called zwiffle. It doesn't taste very good, but some people like it and it can be produced from old newspapers at zero marginal cost. Before any zwiffle could be produced, the firm would have to spend a fixed cost of $F. Demand for zwiffle is given by the equation q = 20 − p. The firm has a patent on zwiffle, so it can have a monopoly in this market.

41.

goes down and its demand for gravel may go up, down or remain the same, depending on the demand function for the concrete.

The Hard Times Concrete Company is a monopolist in the concrete market. It uses two inputs, cement and gravel, which it buys in competitive markets. The company's production function is q = c1/2g1/2, where q is its output, c is the amount of cement it uses, and g is the amount of gravel it uses. If the price of cement goes up, the firm's demand for cement

42.

having it typeset and selling 2,300 copies

The demand for Professor Bongmore's new book is given by the function Q = 5,000 − 100p. If the cost of having the book typeset is $9,000, if the marginal cost of printing an extra copy is $4, and if he has no other costs, then he would maximize his profits by

43.

If he sells at a positive price, demand must be inelastic at that price

A monopolist receives a subsidy from the government for every unit of output that is consumed. He has constant marginal costs and the subsidy that he gets per unit of output is greater than his marginal cost of production. But to get the subsidy on a unit of output, somebody has to consume it.

44.

if the industry is competitive, output will be exactly twice as great as it would be if the industry were monopolized

The demand curve for the output of a certain industry is linear; q = A − Bp. There are constant marginal costs of C. For all values of A, B, and C such that A > 0, B > 0, and 0 < C < A/B,

increase its price by 1 dollars

A profit-maximizing monopoly faces an inverse demand function described by the equation p(y) = 30 − y and its total costs are c(y) = 5y, where prices and costs are measured in dollars. In the past it was not taxed, but now it must pay a tax of 2 dollars per unit of output. After the tax, the monopoly will

45.

46.

increase its price by 3 dollars

A profit-maximizing monopoly faces an inverse demand function described by the equation p(y) = 40 − y and its total costs are c(y) = 7y, where prices and costs are measured in dollars. In the past it was not taxed, but now it must pay a tax of 6 dollars per unit of output. After the tax, the monopoly will

47.

marginal revenue equal to marginal cost

A profit-maximizing monopolist sets

48.

the monopolist cannot be maximizing profits.

A monopolist faces a constant marginal cost of $1 per unit. If at the price he is charging, the price elasticity of demand for the monopolist's output is −0.5, then

49.

The monopolist keep his price constant and his sales double

A monopolist enjoys a monopoly over the right to sell automobiles on a certain island. He imports automobiles from abroad at a cost of $10,000 each and sells them at the price that maximizes profits. One day, the island's government annexes a neighboring island and extends the monopolist's monopoly rights to this island. People on the annexed island have the same tastes and incomes and there are just as many people as on the first.

50.

None of the above

Peter Morgan sells pigeon pies from his pushcart in Central Park. Due to the abundant supplies of raw materials, his costs are zero. The demand schedule for his pigeon pies is p(y) = 80 − y/4. What level of output will maximize Peter's profits?

51.

not change its price or the quantity it sells.

A monopoly has the demand curve q = 10,000 − 100p. Its total cost function is c(q) = 1,000 + 10q. The government plans to tax the monopoly's profits at a rate of 50%. If it does so, the monopoly will

52.

not having it typeset and not selling any copies

The demand for Professor Bongmore's new book is given by the function Q = 2,000 − 100p. If the cost of having the book typeset is $7,000, if the marginal cost of printing an extra copy is $4, and if he has no other costs, then he would maximize his profits by

53.

p/2 - 3/2

A monopolist faces the demand function Q = 7,000/(p + 3)−2. If she charges a price of p, her marginal revenue will be

54.

p/2 - 6/2

A monopolist faces the demand function Q = 4,000/(p + 6)−2. If she charges a price of p, her marginal revenue will be

55.

A Pareto improvement could be achieved by having government pay for the firm a subsidy of $59 and insisting that the firm offer Slops at zero price

A firm has invented a new beverage called Slops. It doesn't taste very good, but it gives people a craving for Lawrence Welk's music and Professor Johnson's jokes. Some people are willing to pay money for this effect, so the demand for Slops is given by the equation q = 14 − p. Slops can be made at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before any Slops can be produced, the firm must undertake a fixed cost of $54. Since the inventor has a patent on Slops, it can be a monopolist in this new industry.

A Pareto improvement could be achieved by having the government pay the firm a subsidy of $35 and insisting that the firm offer Slops at zero price

A firm has invented a new beverage called Slops. It doesn't taste very good, but it gives people a craving for Lawrence Welk's music and Professor Johnson's jokes. Some people are willing to pay money for this effect, so the demand for Slops is given by the equation q = 10 − p. Slops can be made at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before any Slops can be produced, the firm must undertake a fixed cost of $30. Since the inventor has a patent on Slops, it can be a monopolist in this new industry.

57.<...