CFUNBUS3 Lesson 7: Perfect Competition & Monopoly
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Questions and Answers

What condition does the monopolist seek to achieve when maximizing profit?

  • Produce the quantity output at which MR=MC (correct)
  • Produce the quantity output at which P=MC
  • Produce the quantity output at which ATC=MC
  • Produce the quantity output at which P=MR

    • In perfect competition, what curve is the same as the firm's MR curve?

  • Marginal cost curve
  • Average variable cost curve
  • Demand curve (correct)
  • Average total cost curve

    • Why does the MR curve lie below the demand curve in monopoly?

  • MR>MC
  • Demand is perfectly elastic
  • P=MR
  • P>MR (correct)

    • At the profit-maximizing quantity Q1, what is the relationship between price and marginal cost in monopoly?

    <p>Price is greater than marginal cost</p> Signup and view all the answers

    Why is a monopolist considered not resource allocative efficient at Q1?

    <p>P&gt;MC</p> Signup and view all the answers

    What factor determines whether profits are earned in monopoly at Q1?

    <p>$P1$ vs. $ATC$ at $Q1$</p> Signup and view all the answers

    What does the monopolist charge at Q1 in terms of profit maximization?

    <p>$P1$ which maximizes profit</p> Signup and view all the answers

    Which price does the monopolist charge at Q1 if P1 is less than ATC?

    <p>A price higher than average total cost</p> Signup and view all the answers

    What relation must hold for a monopolist to maximize profit?

    <p>$MR=MC$</p> Signup and view all the answers

    How does the demand curve differ between monopoly and perfect competition?

    <p>In monopoly, demand equals marginal revenue.</p> Signup and view all the answers

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