ECON 301 - ALA 9 Exam 2025
Questions and Answers
Consider the following pricing strategy:"Accept the market price as given and sell
all you can at that price."To which market structure does this apply? - --
CORRECT ANSWER--Perfect Competition
Which pricing strategy is easily employed by monopolists, Cournot oligopolists,
and monopolistic competitors? - --CORRECT ANSWER--Set price such that MR
= MC
Suppose the inverse demand function is:P = 12 - 4Q, and cost is given by C(Q) =
4Q.The profit-maximizing price equals $. - --CORRECT ANSWER--MR: same
intercept, 2x slope [P=12-4Q]
MR(Q) = 12 - 8Q
MC(Q): dc/dq [C(Q) = 4Q]
MC(Q) = 4
MR = MC
Q = 1; P = 8
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 1
, The marginal revenue for a firm with market power is given by - --CORRECT
ANSWER--MR = P × (1+EF/EF)
When a monopolist or a monopolistic competitor faces a price elasticity of
demand equal to -1.7, the optimal markup equals ________. - --CORRECT
ANSWER--Markup factor (K)
K = EF/(1+EF)
= -1.7/(1 - 1.7) = 2.4
Optimal pricing strategies in various market structures tend to be - --CORRECT
ANSWER--different depending on the structure and the instruments.
Suppose that "Roper's Rice" faces a price elasticity of demand estimated to be -2.7.
In this case, the profit-maximizing price will be _____ times the marginal cost
(round to the tenths place - --CORRECT ANSWER--k = EF/1+EF
= -2.7/(1-2.7)
= 1.6
One of the most basic pricing strategies for firms with market power is to set price
such that marginal revenue equals _______ ______ . (2 words) - --CORRECT
ANSWER--marginal cost
The higher the marginal cost, the higher the profit-maximizing . - --CORRECT
ANSWER--price
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 2
Questions and Answers
Consider the following pricing strategy:"Accept the market price as given and sell
all you can at that price."To which market structure does this apply? - --
CORRECT ANSWER--Perfect Competition
Which pricing strategy is easily employed by monopolists, Cournot oligopolists,
and monopolistic competitors? - --CORRECT ANSWER--Set price such that MR
= MC
Suppose the inverse demand function is:P = 12 - 4Q, and cost is given by C(Q) =
4Q.The profit-maximizing price equals $. - --CORRECT ANSWER--MR: same
intercept, 2x slope [P=12-4Q]
MR(Q) = 12 - 8Q
MC(Q): dc/dq [C(Q) = 4Q]
MC(Q) = 4
MR = MC
Q = 1; P = 8
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 1
, The marginal revenue for a firm with market power is given by - --CORRECT
ANSWER--MR = P × (1+EF/EF)
When a monopolist or a monopolistic competitor faces a price elasticity of
demand equal to -1.7, the optimal markup equals ________. - --CORRECT
ANSWER--Markup factor (K)
K = EF/(1+EF)
= -1.7/(1 - 1.7) = 2.4
Optimal pricing strategies in various market structures tend to be - --CORRECT
ANSWER--different depending on the structure and the instruments.
Suppose that "Roper's Rice" faces a price elasticity of demand estimated to be -2.7.
In this case, the profit-maximizing price will be _____ times the marginal cost
(round to the tenths place - --CORRECT ANSWER--k = EF/1+EF
= -2.7/(1-2.7)
= 1.6
One of the most basic pricing strategies for firms with market power is to set price
such that marginal revenue equals _______ ______ . (2 words) - --CORRECT
ANSWER--marginal cost
The higher the marginal cost, the higher the profit-maximizing . - --CORRECT
ANSWER--price
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 2
