If a monopolist finds that at the present level of output marginal revenue exceeds marginal cost, the firm should:
a. shut down.
b. expand output.
c. maintain the current output.
d. reduce output (but still produce).
e. raise prices.
QUESTION 2The MU/P equalization principle means consumers will exhaust their expenditure budget so that, in the end, the MU/P ratio is:
a. zero for each good.
b. higher for goods the consumer wants the most.
c. maximized for the goods the consumer wants the most.
d. higher than TU/P.
e. the same for each good.
QUESTION 3Although a monopoly can charge any price it wishes, it chooses:
a. the highest price.
b. price equal to marginal cost.
c. the price that maximizes profit.
d. competitive prices.
e. a fair price.
QUESTION 4Consumer equilibrium exists when:
a. the marginal utility of each good and service consumed is equal.
b. the total utility of each good and service consumed is equal.
c. the marginal utility of each good and service consumed equals its price.
d. ratio of marginal utility to price for all goods and services is equal.
QUESTION 5What should a profit maximizing monopolist do if she is currently producing where MC < MR?
a. Increase output until MC = MR.
b. Decrease output until MC = MR.
c. Shut down in the long run.
d. Keep producing at this level.
e. Operate only in the short run.
QUESTION 6If a consumer wishes to maximize satisfaction given limited income and MUx/Px< MUy/Py then the consumer should:
a. do nothing because she/he is in equilibrium.
b. buy more of X and less of Y.
c. buy more of Y and less of X.
d. buy more of both X and Y.
e. buy less of both X and Y.
QUESTION 7Which of the following is true for a monopolist?
a. The firm has a perfectly elastic demand curve.
b. The firm has a perfectly inelastic demand curve.
c. The straight-line demand curve is above the marginal revenue curve.
d. The marginal revenue curve is above the demand curve.
e. All of these.
QUESTION 8Which of the following statements is true?
a. Total utility is the extra satisfaction from the consumption of a good or service.
b. Marginal utility is the amount of satisfaction received from all the units of a good or service consumed.
c. The law of diminishing marginal utility states that as more of a good or service is consumed total utility decreases.
d. Consumer equilibrium is a combination of goods and services consumed which maximizes total utility from a given budget.
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