Microeconomics
Problem Set #8
Monopoly
Use the following information to answer questions 1 through 4:
The table below shows data for the production of Apples for an individual firm operating as
a monopoly.
Quantity of Apples Price Total Costs
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
1. Given this data, complete the table:
Quantity of
Apples
Total
Revenue (TR) Profit
Marginal
Revenue
(MR)
Marginal
Costs (MC)
0 - -
10
20
30
40
50
60
70
80
2. At what quantity are marginal revenues equal to marginal costs?
3. What is the profit maximizing quantity?
NOTE: If there are two quantities with the same level of profits, pick the larger of the two quantities!
4. What is the profit maximizing price?
NOTE: If there are two quantities with the same level of profits, pick the larger of the two quantities!
Use the following information to answer questions 5 through 9:
The graph below shows the demand curve and cost data for a firm operating as a monopolist.
5. The blue line shows:
a. Demand Curve
. Marginal Costs
c. Marginal Revenue
6. The red line shows:
a. Demand Curve
. Marginal Costs
c. Marginal Revenue
7. The black line shows:
a. Demand Curve
. Marginal Costs
c. Marginal Revenue
8. The profit maximizing quantity for this monopolist is:
a. 8.25
. 6.25
c. 7.89
d. 9.89
9. What price will the monopolist set in order to maximize profits (or minimize losses)?
a. 13.88
. 11.88
c. 11.05
d. 13.05
10. The graph below shows demand curve and cost data for a firm operating as a monopolist. In
addition, the green line shows average total costs (ATC).
At the profit maximizing (loss minimizing) quantity, the monopolist is experiencing
a. Losses
. Break-even point
c. Profits
Use the following information to answer questions 11 through 14:
The graph below shows demand curve and cost data for a firm operating as a monopolist. In
addition, the green line shows average total costs (ATC).
11. Suppose that the government decided to regulate this monopolist by requiring the firm to
produce at the point where the Marginal Cost curve intersects with the demand curve.
What is the quantity under this marginal cost pricing?
a. 4.84
. 6.84
c. 2.84
12. Suppose that the government decided to regulate this monopolist by requiring the firm to
produce at the point where the Marginal Cost curve intersects with the demand curve.
What is the price under this marginal cost pricing?
a. 12.58
. 14.58
c. 10.58
13. Compared to the profit maximizing quantity for this monopolist, the marginal cost pricing
quantity is
a. Bigger
. The same
c. Smaller
14. Compared to the profit maximizing price for this monopolist, the marginal cost pricing price
is
a. Higher
. The same
c. Lower