A) grants the creator of a book, film, or piece of music the exclusive right to use the creation for 20 years. B) grants the creator of a book, film, or piece of music the exclusive right to use the creation during the creator's lifetime. C) gives a firm the exclusive right to a new product for 20 years from the date the patent application is filed with the government. D) gives a firm the exclusive right to a new product during the product inventor's lifetime. A) grants the creator of a book, film, or piece of music the exclusive right to use the creation for 20 years. B) grants the creator of a book, film, or piece of music the exclusive right to use the creation during the creator's lifetime. C) gives a firm the exclusive right to a new product for 20 years from the date the patent application is filed with the government. D) gives a firm the exclusive right to a new product during the product inventor's lifetime.

Exam 15: Monopoly and Antitrust Policy

Figure 15-17 Your college decides to offer a psychology course as a MOOC that can be taken by students anywhere in the world, whether they are actually enrolled in your college or not. The demand and cost situation for the MOOC is shown in the figure. -Refer to Figure 15-17.An economics professor argues: "I think the course should be priced so as to achieve economic efficiency." How much profit (or loss)will the college make on the course if it charges this price?

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Question 1

Correct Answer:

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a.What is the defining characteristic of a natural monopoly? b.Should the government break up a natural monopoly into two or more firms to make the industry more competitive? c.Suppose the government wants to ensure that some of the benefits of declining average total cost are passed on to consumers.To achieve this goal, it requires that the natural monopoly set its price equal to marginal cost.Is this a feasible goal? Explain. d.What is an alternative to marginal cost pricing that ensures that consumers reap some of the benefits of declining average total cost?

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Question 2

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a.The defining characteristic is the presence of significant economies of scale such that the average total cost of production declines over the relevant range of market demand.
b.No, given the importance of economies of scale, society is better of with one big firm producing the output rather than several small firms.
c.Setting price equals to marginal cost is not feasible because the natural monopoly will incur persistent losses and will not continue to produce in the long run.
d.An alternative solution is to require average total cost pricing; that is, price is set equal to the average cost of production (where the average cost includes the opportunity cost of funds invested in the firm by its owners).This will allow the monopolist to break even on its investment and stay in business.

If a monopolist's price is $50 and average total cost is $43, then the average profit is $7.

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Question 3

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True

The De Beers diamond mining and marketing company of South Africa became one of the most profitable and longest-lived monopolies in history.Which of the following has always threatened De Beers' control of the diamond market?

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Question 4

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions.

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Question 5

The demand curve for a monopoly firm

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Question 6

Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist. -Refer to Figure 15-4.What is likely to happen to this monopoly in the long run if costs and demand stay the same?

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Question 7

If you own the only bookstore in a small town, do you have a monopoly?

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Question 8

What gives rise to a natural monopoly? How do consumers benefit from a natural monopoly?

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Question 9

A patent

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Question 10

To be a natural monopoly, a firm must

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Question 11

In the short run, even if a monopoly's total revenue does not cover its variable costs, it should continue to produce because ultimately in the long run, the monopoly will start earning profits.

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Question 12

Some economists argue that Microsoft became a monopoly in the market for computer software by developing MS-DOS, an operating system used for the first IBM personal computers.The more people who used MS-DOS-based programs, the greater the usefulness of a using a computer with an MS-DOS operating system.The explanation for Microsoft's monopoly is

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Question 13

A narrow definition of monopoly is that a firm is a monopoly if it can ignore

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Question 14

When a proposed merger between two companies is reviewed by the government, the relevant market is defined by

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Question 15

Firms that face downward-sloping demand curves for their output in the product market are called

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Question 16

Suppose that a perfectly competitive industry becomes a monopoly.What effect will this have on consumer surplus, producer surplus, and deadweight loss?

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Question 17

Figure 15-17 Your college decides to offer a psychology course as a MOOC that can be taken by students anywhere in the world, whether they are actually enrolled in your college or not. The demand and cost situation for the MOOC is shown in the figure. -Refer to Figure 15-17.The dean of the college argues: "I think the course should be priced to maximize the profit the college earns, so these funds can be used to pay some other expenses." Which price should the dean favor?

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Question 18

What happens to a monopoly's revenue when it sells more units of its product?

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Question 19

Explain why market power leads to a deadweight loss.Is the total deadweight loss from market power in the United States large or small?

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Question 20

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If a monopolist's price is $50 and average total cost is $43, then the average profit is $7.

The De Beers diamond mining and marketing company of South Africa became one of the most profitable and longest-lived monopolies in history.Which of the following has always threatened De Beers' control of the diamond market?

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions.

The demand curve for a monopoly firm

Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist. -Refer to Figure 15-4.What is likely to happen to this monopoly in the long run if costs and demand stay the same?

If you own the only bookstore in a small town, do you have a monopoly?

What gives rise to a natural monopoly? How do consumers benefit from a natural monopoly?

A patent

To be a natural monopoly, a firm must

In the short run, even if a monopoly's total revenue does not cover its variable costs, it should continue to produce because ultimately in the long run, the monopoly will start earning profits.

A narrow definition of monopoly is that a firm is a monopoly if it can ignore

When a proposed merger between two companies is reviewed by the government, the relevant market is defined by

Firms that face downward-sloping demand curves for their output in the product market are called

Suppose that a perfectly competitive industry becomes a monopoly.What effect will this have on consumer surplus, producer surplus, and deadweight loss?

What happens to a monopoly's revenue when it sells more units of its product?

Explain why market power leads to a deadweight loss.Is the total deadweight loss from market power in the United States large or small?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

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