# FINANCE

Given the information in the table at right, calculate the dry cleaner’s marginal revenue (MR) and marginal cost (MC) at each output level. (Your answer should be rounded to the nearest cent.)

Output
(Suits Cleaned) Price per Suit (\$) Total Costs (\$) Total Revenue (\$) MC (\$) MR (\$)
0 10.00 3.00 0.00 − −
1 9.50 6.00 9.50
2 9.00 8.50 18.00
3 8.50 10.50 25.50
4 8.00 11.50 32.00
5 7.50 13.50 37.50
6 7.00 18.00 42.00
7 6.50 24.00 45.50
8 6.00 26.00 48.00

Based on marginal analysis, what is the profit-maximizing level of output? units.

A monopolist’s maximized rate of economic profits is \$600 per week. Its weekly output is 300 units, and at this output rate, the firm’s marginal cost is \$27 per unit. The price at which it sells each unit is \$37 per unit.
At these profit and output rates, the firm’s average total cost is \$ .(Enter your response as a whole number.)
At these profit and output rates, the firm’s marginal revenue is \$ . (Enter your response as a whole number.)

The table below depicts the daily output, price, and costs of a monopoly dry cleaner located near the campus of a remote college town. Compute the revenues at each output level and fill in the blanks. (Enter dollars and cents and include minus signs where necessary.)

Output
(Suits Cleaned) Price per Suit (\$) Total Costs (\$) Total Revenue (\$)
0 \$12.00 \$3.00
1 \$11.50 \$6.00
2 \$11.00 \$8.50
3 \$10.50 \$10.50
4 \$10.00 \$11.50
5 \$9.50 \$13.50
6 \$9.00 \$20.00
7 \$8.50 \$28.00
8 \$8.00 \$32.00

In the graph, the profit-maximizing price for a monopoly is
A  P4.
B. P2.
C. P3.
D. P1.

The monopolist sets price by
A. charging the price where average total cost equals marginal cost.
B. charging the price where marginal cost equals price.
C. charging the price where marginal revenue equals price.
D. producing the quantity where marginal cost equals marginal revenue and charging the price that corresponds to that quantity.

Which of the following is not necessary for price discrimination to exist?
A. The ability to separate markets at reasonable cost.
B. Buyers in various markets must have different price elasticities of demand.
C. The ability to prevent resale of the product or service.
D. A perfectly elastic demand curve.

The graph to the right shows demand and marginal revenue curves for a monopoly firm. Complete both steps and then check your answer. Assume the marginal cost is not constant.
1.) Using the line drawing  tool, draw a line showing a possible short-run marginal cost curve for this firm. Label this line ‘MC’.
2.) Using the point drawing tool, plot the point identifying this firm’s profit-maximizing output level and corresponding price to be charged. Label this point ‘B’. Carefully follow the instructions above, and only draw the required objects.

In order to price discriminate, a firm must
A. face a downward-sloping demand curve.
B. have permission from the government.
C. be sure the price-marginal cost ratio is the same for all its submarkets.
D. set price equal to marginal cost.

Charging different prices for similar products that have different marginal costs is called
A. predatory pricing.
B. price dumping.
C. price discrimination.
D. price differentiation.

If a public utility company is considered a monopolist, which of the following is not true?
A. Its profit maximizing quantity is determined where its marginal revenue equals its marginal cost.
B. For the company to practice price discrimination, there should not be any resale of its product.
C. Its price must be higher than its marginal revenue.
D. The company’s demand curve and supply curve are upward sloping.

Why is there a social cost of monopoly?
A. Too many resources are being used in a monopoly.
B. The firm does not equate marginal cost to marginal revenue.
C. The firm produces too much of the good.
D. Too few resources are being used in a monopoly.

Monopoly has social costs because
A. too few resources are being used in the monopoly industry and too many are used elsewhere.
B. a monopoly produces less and charges a higher price than a perfectly competitive firm would producing the same product or service.
C. P is greater than MC and this implies economic inefficiency.
D. All of the above.

If we were to compare the amount produced by firms in a competitive industry to the output produced by a monopoly, the monopolist will produce
A. on the inelastic portion of the demand curve but at a higher price.
B. on the inelastic portion of the demand curve because the monopolist would make the entire demand curve inelastic.
C. the same quantity but would make profits because of economies of scale.
D. on the elastic portion of the demand curve and charge a higher price.

A monopoly is socially inefficient because it
A. makes profits even in the long run.
B. makes consumers buy goods they really don’t need.
C. makes profits.
D. charges a price greater than marginal cost.

Selected Occupations Requiring Licenses in Some U.S. States
Acupuncturists Glass Installers Nutritionists
Athletic trainers Hearing-aid fitters Secondhand booksellers
Ballroom-dancing teachers Hunting guides Shampoo specialists
Barbers Librarians Tattoo artists
Dieticians Locksmiths Tour guides
Electricians Manicurists Tree-trimmers
Frozen-dessert retailers Massage therapists Wig specialists
Funeral directors Private detectives Windshield repairers
Hair braiders Respiratory therapists Yoga instructors
The above table lists some of the occupations that require licenses in at least a few states. All told, 1,100 different jobs now require a license in at least one state that is nearly 40 percent larger than three decades ago. Thus, it can surmised that
A. there has been new federal laws passed against license requirement for new jobs.
B. the number of occupational licenses issued have been going down.
C. the number of occupational licenses issued have remained unchanged.
D. there has been an occupational license explosion in the U.S.

Recently in states across the land, licensing rules have expanded with each passing year. In order to obtain occupational licenses, people typically must pay fees or engage in a period of study. Such licensing requirements constitute
A. deregulation.
B. patents.
C. free entry.
D. barriers to entry.

People in licensed occupations earn about 15 percent higher incomes because consumers pay higher prices to obtain the services of people in licensed occupations. Therefore, licenses create
A. low quality products.
B. higher costs of production.
C. free entry and exit to any profession.
D. monopoly profits.

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