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Exam 12: Managerial Decisions for Firms With Market Power

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Question 51

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A firm with market power faces the following estimated demand and average variable cost functions: $Q _ { d } = 39,000 - 500 P + 0.4 M - 8,000 P _ { R }$ $A V C = 30 - 0.005 Q + 0.0000005 Q ^ { 2 }$ where $Q _ { d }$ is quantity demanded,P is price,M is income,and $P _ { R }$ is the price of a related good.The firm expects income to be $40,000 and $P _ { R }$ to be $2.Total fixed cost is $100,000.What price should the firm charge in order to maximize profit?

A) $42.50
B) $48
C) $50
D) $62
E) $70

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Question 52

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Columns 1 and 2 make up a portion of a monopolist's production function for a single variable input,labor.Columns 2 and 3 represent the demand function facing the monopolist over this range of output: $\begin{array}{c}\begin{array}{c}(1) \\\text {Units of Labor}\\3 \\4 \\5 \\6 \\7\end{array}\begin{array}{c}(2) \\\text {Units of Output}\\370 \\490 \\570 \\600\\620\end{array}\begin{array}{c}(3) \\\text {Price}\\\$10\\9\\8\\7\\6\end{array}\end{array}$ If an increase in consumers' income increases product price by $2 at each level of output,how many units of labor will the firm employ at a wage rate of $300?

A) 3
B) 4
C) 5
D) 6
E) 7

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Question 53

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A firm with market power will maximize profit by hiring the amount of an input at which the

If a monopolist is producing a level of output at which demand is inelastic,then

The figure above shows the demand and cost curves facing a price-setting firm.In profit-maximizing (or loss-minimizing) equilibrium,the price-setting firm earns $______ in total revenue,which is ___________ the maximum possible total revenue of $________.

The figure above shows the demand and cost conditions for a firm with two plants.In order to maximize profit,how many units of output should the firm produce?

Using time-series data,the demand function for a profit-maximizing monopolist has been estimated as $Q _ { d } = 142,000 - 500 P + 6 M - 400 P _ { R }$ where $Q _ { d }$ is the amount sold,P is price,M is income,and $P _ { R }$ is the price of a related good.The estimated values for M and $P _ { R }$ in 2021are $25,000 and $200,respectively.The short-run marginal cost curve for this firm has been estimated as: $M C = 200 - 0.024 Q + 0.000006 Q ^ { 2 }$ Total fixed cost is forecast to be $500,000 in 2021.What is the value of average variable cost at the optimal level of output?

A firm with two plants,A and B,has the following estimated demand and marginal cost functions: $\begin{array} { l } Q _ { d } = 120 - 10 P \\M C _ { A } = 4 + ( 1 / 5 ) Q _ { A } \\M C _ { A } = 6 + ( 1 / 10 ) Q _ { A }\end{array}$ In order to maximize profit,how many units of output should the firm produce?

The graph above shows the demand and cost conditions facing a monopolist.What price will the monopolist set?

A firm is producing 10,000 units of output in two plants,A and B,and each plant is producing 5,000 units of output.The marginal cost in plant A is $10 and the marginal cost in B is $6.To reduce the cost of producing 10,000 units the firm should

Suppose that a profit-maximizing monopolist has a plant of optimal size and is producing a level of output at which price is $30,average total cost is $55,and average fixed cost is $40.The firm should

The following figure shows the demand and cost curves facing a firm with market power in the short run. The firm earns profits of

A firm with market power faces the following estimated demand and average variable cost functions: $Q _ { d } = 39,000 - 500 P + 0.4 M - 8,000 P _ { R }$ $A V C = 30 - 0.005 Q + 0.0000005 Q ^ { 2 }$ where $Q _ { d }$ is quantity demanded,P is price,M is income,and $P _ { R }$ is the price of a related good.The firm expects income to be $40,000 and $P _ { R }$ to be $2.Total fixed cost is $100,000.What is the profit-maximizing choice of output?

The above graph shows the demand and cost conditions facing a price-setting firm. The firm will produce _____ units of output and charge a price of _____.

In a monopolistically competitive market,

If a monopolistically competitive market is in long-run equilibrium,each firm

The inverse demand equation for a monopoly firm is P = 60 - 0.015Q.The monopolist faces constant costs of production in the long run with LAC = LMC = $30.At the profit-maximizing price of $___________,the monopolist earns economic profit of $_________.

The market demand for a monopoly firm is estimated to be: $Q _ { d } = 100,000 - 500 P + 2 M + 5000 P _ { R }$ where $Q _ { d }$ is quantity demanded,P is price,M is income,and $P _ { R }$ is the price of a related good.The manager has forecasted the values of M and $P _ { R }$ will be $50,000 and $20,respectively,in 2021.For 2021,the forecasted demand function is

Refer to the following table showing a monopolist's demand schedule: $\begin{array} { c c } \text { Price } & \text { Quantity } \\\hline \$ 50 & 300 \\40 & 600 \\20 & \text { 800 } \\10 & 1,000\end{array}$ If price falls from $20 to $10,then

The following figure shows the demand and cost curves facing a firm with market power in the short run. The profit-maximizing level of output is