Exam (elaborations)
ecs2601 assignment 05 semester 2 2023
- Institution
- University Of South Africa (Unisa)
- Book
- Microeconomics
ecs2601 assignment 05 semester 2 2023
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BMZ ACADEMYBMZ ACADEMY
@061 262 1185/068 053 8213/0717 513 144
BMZ ACADEMY 061 262 1185/068 053 8213/0717 513 144
, BMZ ACADEMY
Which of the following is correct regarding a pure monopoly?
a Monopolies are efficient.
b. Monopolies are state-owned.
c. Monopolies can be price-discriminating.
d. Demand is the same as the marginal revenue.
Question text
A monopolist has equated marginal revenue to zero. The firm has:
a. maximised revenue.
b. minimised profit
c. maximised profit.
d. minimised cost.
Question text
Which of the following statements about a monopolistic competitor is FALSE?
a. A monopolistic competitor will produce at an output level where its MR and SMC
curves intersect, given that it would make either a profit or a loss, which is less than its
total fixed cost.
b. The monopolistic competitor’s supply curve is part of its marginal cost curve.
c. The demand curve of a monopolistic competitor and that of its competitors may all
have different positions.
d. The demand curve of a monopolistic competitor is downward sloping.
Question text
Which is NOT true of state-owned and managed natural monopolies?
a. The wise state government will set price equal to average total cost (ATC) so that
losses will not have to be borne by the taxpayer.
b. Bureaucrats frequently maximise the operating budgets of their departments rather
than function with a profit-maximisation objective.
c. X-inefficiency is common because the incentives for profit are missing.
d. The state is better able to price at marginal cost (MC) because it can use its taxing
power to cover the losses that result from the MC pricing.
Which of the following statements is incorrect about a firm operating in a perfectly
competitive market?
a. A price higher than the marginal cost is charged.
b. The demand schedule is perfectly elastic.
BMZ ACADEMY 061 262 1185/068 053 8213/0717 513 144
, BMZ ACADEMY
c. There is no government intervention.
d. The firm is a price taker.
Question text
A natural monopoly is typically characterised by …
a. low fixed costs (FC) but very high variable costs (VC).
b. increasing average costs (AC), which makes it hard for new entrants to enter the
industry.
c. highly elastic product demand curves.
d. marginal costs (MC) that are lower than AC for large quantities of output.
Question text
Which of the following is correct regarding a firm operating in an oligopolistic market?
a. A cartel is generally illegal.
b. The firm has imperfect information.
c. The firm is a utility minimiser.
d. The firm demand is the same as its average revenue.
Question text
A firm faces the following average revenue (demand) curve:
P = 120 – 0.02Q
where Q is weekly production and P is price, measured in cents per unit. The firm’s
cost function is given by C = 60Q + 25,000. Assume that the firm maximizes profits.
What is the level of production?
a. 750
b. 6000
c. 1500
d. 3000
Question text
A monopolist in a glass making market appoints you as a pricing strategist and wants to
know how many glass products should the company produce and what price should the
company charge in order to maximise profit. The demand, marginal revenue and
marginal costs curves of the company are as follows:
Demand: P=10-Q
MR=10-2Q
MC=2.5+0.5Q
What price should the company charge to maximise its profit?
a. 3
b. 5
c. 8
d. 7
Question text
BMZ ACADEMY 061 262 1185/068 053 8213/0717 513 144
, BMZ ACADEMY
Assume the marginal cost of a firm to produce headphones is R50. If the consumer is
willing to pay R80 for the headphones, this means the reservation price of the consumer
is
a. 50
b. 30
c. 130
d. 80
Question text
Consider the following functions faced by a monopolist:
Demand: P=20-2Q
MR=20-4Q
MC=5+Q
At which level of output is profit being maximised?
a. 3
b. 2
c. 5
d. 10
Question text
A monopolist can produce at a constant average (and marginal) cost of AC = MC = R5.
It faces a market demand curve given by Q = 53 – P.
Calculate the profit-maximizing price and quantity for this monopolist.
a. None of the options is correct.
b. P = 53, Q = 26.5
c. P = 29, Q= 24
d. P = 26.5, Q = 53
Question text
Which of the following is true for a Stackelberg model?
a. The first firm produces less than its rival.
b. Both firms have a reaction curve
c. The first firm produces more than its rival.
d. Both firms produce the same quantity.
Question text
Which condition/s can give rise to a monopoly power?
a. All of the options are correct
b. Positive externalities.
c. Cost advantages
d. Brand dominance.
Question text
Optimal, third-degree price discrimination do not require that marginal revenue for each
group of consumers equals marginal cost.
BMZ ACADEMY 061 262 1185/068 053 8213/0717 513 144
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