CLEP Microeconomics chapter practice4 questions

22 Monopoly Output and Price

These questions come directly from the chapter practice in the book. Choose the best answer, check your reasoning, and use the explanation to correct any gap.

Question 1

Question 1 of 4

A single-price monopolist maximizes profit by choosing the quantity where

The monopolist uses the same marginal rule as other firms: select quantity where marginal revenue meets marginal cost.
Show answer and explanation

D. marginal revenue equals marginal cost

The monopolist uses the same marginal rule as other firms: select quantity where marginal revenue meets marginal cost.

Question 2

Question 2 of 4

After a monopolist finds its profit-maximizing quantity, it determines price from

Demand shows the maximum price buyers will pay for the chosen quantity. Marginal revenue is not the price.
Show answer and explanation

A. the demand curve

Demand shows the maximum price buyers will pay for the chosen quantity. Marginal revenue is not the price.

Question 3

Question 3 of 4

A monopolist faces demand P=60-Q, so marginal revenue is MR=60-2Q. If marginal cost is constant at $20, profit-maximizing quantity is

Set 60-2Q=20, giving 2Q=40 and Q=20. Demand would then determine price.
Show answer and explanation

C. 20

Set 60-2Q=20, giving 2Q=40 and Q=20. Demand would then determine price.

Question 4

Question 4 of 4

Why does marginal revenue lie below demand for a single-price monopolist?

The added unit brings in its price but the necessary price cut reduces revenue on units that would otherwise sell at the higher price.
Show answer and explanation

A. A price cut on the extra unit also lowers revenue on earlier units.

The added unit brings in its price but the necessary price cut reduces revenue on units that would otherwise sell at the higher price.

Quiz complete