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To have a monopoly in an industry there must be
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barriers to entry so high that no other firms can enter the industry.
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A patent or copyright is a barrier to entry based on
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government action to protect a producer.
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Refer to the diagram to the right which shows the demand and cost curves facing a monopolist.
Suppose the monopolist represented in the diagram to the right produces positive output. What is the profit maximizing/lossminusminimizing output level?
Suppose the monopolist represented in the diagram to the right produces positive output. What is the profit maximizing/lossminusminimizing output level?
answer
630 units
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A natural monopoly is most likely to occur in which of the following industries?
answer
an industry where fixed costs are very large relative to variable costs
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The Federal Trade Commission (FTC) Act
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divided authority to police mergers between the FTC and the Department of Justice.
question
Refer to the diagram to the right which shows the demand and cost curves facing a monopolist.
If the firm's average total cost curve is ATC3, the firm will
If the firm's average total cost curve is ATC3, the firm will
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suffer a loss.
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Which of the following firms is patent protection of vital importance to?
answer
pharmaceutical firms
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Assume a hypothetical case where an industry begins as perfect competition and then becomes a monopoly. As a result of this change,
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consumer surplus will be smaller, producer surplus will be greater, and there will be a reduction in economic efficiency.
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A monopoly is characterized by all of the following except
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there are only a few sellers, each selling a unique product.
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To be a natural monopoly, a firm must
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have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms.
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Compared to perfect competition, the consumer surplus in a monopoly
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is lower because price is higher and output is lower.
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Refer to the diagram which shows the demand and cost curves for a monopolist.
What is likely to happen to this monopoly in the long run if costs and demand stay the same?
What is likely to happen to this monopoly in the long run if costs and demand stay the same?
answer
As long as there are entry barriers, this firm will continue to enjoy economic profits.
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The demand curve for a monopoly's product is
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the market demand for the product.
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A monopolist's profit-maximizing price and output correspond to the point on a graph
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where marginal revenue equals marginal cost and charging the price on the market demand curve for that output.
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What type of protection does U.S. law grant the creator of a book, film, or piece of music?
answer
A copyright, which grants the exclusive right to use the creation during the creator's lifetime and to his or her heirs for 70 years after the creator's death.
question
Refer to the diagram to the right which shows the demand and cost curves facing a monopolist.
Suppose the monopolist represented in the diagram to the right produces positive output. What is the price charged at the profit-maximizing/loss-minimizing output level?
Suppose the monopolist represented in the diagram to the right produces positive output. What is the price charged at the profit-maximizing/loss-minimizing output level?
answer
$68
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A local electricity-generating company has a monopoly that is protected by an entry barrier that takes the form of
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economies of scale.
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Economic efficiency in a free market occurs when
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the sum of consumer surplus and producer surplus is maximized.
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The Clayton Act prohibited
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any merger if its effect was to substantially lessen competition or create a monopoly.
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A United States government patent lasts
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20 years.
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The Sherman Act prohibited
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collusive price agreements among rival sellers.
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Refer to the diagram to the right. The deadweight loss due to a monopoly is represented by the area
answer
FHE.
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Governments grant patents to encourage
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research and development on new products.
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Because a monopoly's demand curve is the same as the market demand curve for its product,
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the monopoly must lower its price to sell more of its product.
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Long run economic profits would most likely exist in which market structure?
answer
monopoly and oligopoly
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A horizontal merger
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is a merger between firms in the same industry.
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Assume a hypothetical case where an industry begins as perfect competition and then becomes a monopoly. Which of the following statements comparing the conditions in the industry under both market structures is true?
answer
A monopoly will produce less and charge a higher price than would a perfectly competitive industry producing the same good.
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Refer to the diagram which shows the demand and cost curves for a monopolist.
What is the amount of the monopoly's profit?
What is the amount of the monopoly's profit?
answer
$2,700
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A monopolist faces
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a downward-sloping demand curve.
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A profit maximizing monopoly's price is
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greater than the price that would prevail if the industry is perfectly competitive.
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