Marginal revenue is
a. total revenue minus total cost
b. total revenue divided by quantity of output
c. the change in total revenue divided by the change in output
d. the change in total revenue divided by the change in the quantity of an input used
e. economic profit
QUESTION 2Suppose it costs Minnie's Mini-Golf (a monopolist) not a penny more to let another person on the course. If Minnie's faces a linear (downward-sloping) market demand curve, it will maximize profit by choosing the point on the demand curve at which
a. marginal revenue is greatest
b. price elasticity is unit elastic
c. price elasticity is inelastic
d. price exceeds average total cost by the greatest amount
e. price exceeds marginal cost by the greatest amount
QUESTION 3In a natural monopoly, throughout the range of market demand,
a. marginal cost exceeds average cost and therefore pulls average cost upward
b. average cost exceeds marginal cost and therefore pulls marginal cost upward
c. marginal cost is below average cost and therefore pulls average cost downward
d. average cost is equal to marginal cost
e. there are diseconomies of scale
QUESTION 4The Hound Dog Bus Company contemplates expanding its Virginia operations by offering service from Fairfax to Arlington. The total cost of the trip would be 120, of which 50 is fixed cost, which it has already paid. The firm expects to earn 60 in revenue from the trip. The Hound Dog Bus Company should
a. offer this service because it will earn a positive economic profit
b. not offer this service because the marginal revenue is less than the marginal cost
c. offer this service because the revenue exceeds fixed cost
d. not offer this service because the total cost exceeds the total revenue
e. offer this service because the added revenue exceeds the added cost of this service
QUESTION 5What is the relationship between price elasticity of demand and the monopolist's revenue?
a. marginal revenue is maximized where demand is unit elastic.
b. average revenue is maximized where demand is unit elastic.
c. marginal revenue is negative where demand is inelastic.
d. average revenue is negative where demand is inelastic.
e. marginal revenue is lowest where demand is unit elastic.
QUESTION 6A natural monopoly exists when, throughout the range of market demand,
a. average cost is increasing
b. there are diseconomies of scale
c. average cost is decreasing
d. average cost is constant
e. marginal cost exceeds average cost
QUESTION 7The Hound Dog Bus Company contemplates expanding its New Mexico operations by offering service from Raton to Milk-of-Magnesia. The total cost of the trip would be 400, of which 150 is fixed cost, which it has already paid. The firm expects to earn 275 in revenue from the trip. The Hound Dog Bus Co should
a. offer this service because it will earn a positive economic profit
b. not offer this service because the marginal revenue is less than the marginal cost
c. offer this service because the revenue exceeds fixed cost
d. not offer this service because the total cost exceeds the total revenue
e. offer this service because the added revenue exceeds the added cost of this service