Micro Chapter 22 Practice Problems #2 Key

1. One feature of pure monopoly is that the demand curve: A) is vertical. B) is horizontal. C) slopes upward. D) slopes downward.
Answer: D
2. The demand curve confronting a nondiscriminating pure monopolist is: A) horizontal. B) the same as the industry's demand curve. C) more elastic than the demand curve confronting a competitive firm. D) derived by vertically summing the individual demand curves for the buyers.
Answer: B
3. Under pure monopoly, a profit-maximizing firm will produce: A) in the inelastic range of its demand curve. C) only where total costs are zero. B) in the elastic range of its demand curve. D) only where marginal revenue is zero.
Answer: B

It shows the demand schedule facing Nina, a monopolist selling baskets.

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4. Refer to the above table. What is the change in total revenue if she lowers the price from $20 to $18? A) $10 B) $20 C) $30 D) $40
Answer: C
5. Refer to the above table. What is the change in total revenue if she raises the price from $10 to $12? A) –$300 B) +$300 C) +$120 D) –$120
Answer: D
6. A profit-maximizing firm should shut down in the short run if the average revenue it receives is less than: A) average variable cost. B) average total cost. C) average fixed cost. D) marginal cost.
Answer: A
7. A pure monopolist which is maximizing short-run profits will produce: A) on the elastic portion of the demand curve. B) on the inelastic portion of the demand curve. C) at the point on the demand curve where total revenue is maximized. D) where marginal revenue exceeds marginal cost by the largest amount.
Answer: A
8. A monopolist can sell 20 toys per day for $8.00 each. To sell 21 toys per day, the price must be cut to $7.00. The marginal revenue of the 21st toy is: A) –$10. B) –$13.