Exam 13: Monopoly and Antitrust Policy

Why is a government franchise likely to serve as a stronger barrier to entry than possessing technology than competitors don't currently posses?

What is the one thing that all firms in an imperfectly competitive market have in common?

A doctor sets up a private practice in small town where he faces no other competitors. In spite of his monopoly position why is he not guaranteed to make a profit?

What determines how much market power a firm has?

ABC, Incorporated has a local monopoly in the sale of automatic paper towel dispensers. The table below shows the demand for these towel dispensers at various prices. The total cost of production of the various levels of output is also shown. Calculate total revenue and profit for the firm. What level of output maximizes profit? What price should the firm charge?

A bureaucrat at a public utility commission hearing testifies that the local area telephone monopoly is able to maximize its revenue. For that reason the rate-hike request should be denied.

Segway Corporation has a monopoly on its personal transporter, which is a scooter that carries one person. The company achieved its monopoly through the procurement of a patent. In spite of this advantage it has yet to turn a profit. One major impediment for the product is the existence of local ordinance around the country that prohibits the use of motorized scooters on sidewalks where the Segway might otherwise provide great utility to users. Where do you believe the demand curve is in relation to the average total cost? What do you believe the company's executives are banking on since they continue to stay in business even in the face of losses?

Use Figure 13.2 which depicts a monopolist firm to help with the following question. Why would this firm not find it profitable to produce more than Qm or less than Qm?

What are barriers to entry?

What is a patent?

How does the demand curve facing a monopoly firm compare with the demand curve facing a perfectly competitive firm?

XYZ Company has a local monopoly in the sale of water fountains. The table below shows the demand for water fountains at various prices. The total cost of production of the various levels of output is also shown. Calculate total revenue and profit for the firm. What level of output maximizes profit? What price should the firm charge?

Critically evaluate the following statement. "Monopolists are able to pass on the full amount of any increase in their fixed cost to the consumer in the form of higher prices."

What is the profit-maximizing rule for a monopolist?

The chief executive officer of a monopoly firm gives a directive to his production managers to maximize the per unit profit for the upcoming fiscal year. Evaluate the economic wisdom of this advice.

Why is it that pure monopoly would not likely exist without government?

What four decisions must firms with market power make?

Draw a linear demand curve and marginal revenue curve and the corresponding total revenue curve below it.

The table below represents the demand for Widgets, Inc., which has a monopoly in the sale of widgets. Calculate total revenue and marginal revenue for the levels of output given.

The Polaroid corporation earned a patent for its instamatic camera in the 1960s. If the constitutional length of patent protection is 20 years, why do you believe Polaroid's effective use of its patent ended much earlier?