1. If a monopolist lowers its price and its demand is inelastic, then its

a. total revenue increases.

b. total revenue decreases.

c. total revenue is negative.

d. total revenue does not change.

2. Now, assume there is a frost in Florida that destroys part of the orange crop. What happens to the market for oranges in this case?

a. The supply curve shifts left

b. There is no shift in the demand or supply curves

c. The demand curve shifts right

d. The supply curve shifts right

3. A monopolist faces the inverse demand function described by P=50-4Q where Q is output. Assume that the monopolist has no fixed cost but his average total cost is $5. Which of the following expresses the monopolist's profits as a function of his output?

50 - 4Q - 5

50 - 8Q

45Q - 4Q2

50Q - 4Q2 - 5

4. Which of the following statement about the relationship between the marginal cost and average cost is correct?

a. When MC exceeds AC, AC must be rising.

b. When AC exceeds MC, MC must be rising.

c. When MC is falling, AC is falling.

d. When AC equals to MC, the point is MC's lowest point.

5. The production function is given as f(L, K) = L2 K . In the short run, K is fixed at 1. The price of L is $3 per unit and price of K is $5. In order to produce 100 units as a desired output, how much is the total cost?

a. 10

b. 15

c. 30

d. 35