Exam 15: Monopoly and Antitrust Policy

Joe Santos owns the only pizza parlor in a small town that is also home to a McDonald's, a Taco Bell, and a Kentucky Fried Chicken.Using a broad definition of a monopoly, Joe has a monopoly.

Consider an industry that is made up of six firms with the following market shares: Firm A - 50%, Firm B - 20%, Firms C and D - 10% each, and Firms E and F - 5% each.What is the value of the Herfindahl-Hirschman Index and how will the industry be categorized?

How does a network externality serve as a barrier to entry? Is this barrier surmountable? Explain.

If a monopolist's price is $50 at 63 units of output and marginal revenue equals marginal cost, and average total cost equals $43, then the firm's total profit is

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 faculty member who designed the course argues: "I think the course should be priced so that the maximum number of students enroll." Which price should this faculty member favor?

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?

The Federal Trade Commission (FTC)Act

To maximize profit a monopolist will produce where

A monopoly firm's demand curve

Which of the following statements applies to a monopolist but not to a perfectly competitive firm at their profit-maximizing outputs?

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.Erickson Power is a natural monopoly because

The demand curve for a monopoly firm

Economists played a key role in the development of merger guidelines by the Department of Justice and the Federal Trade Commission in 1982.These guidelines have three main parts.What are these parts?

Merger guidelines developed by the Antitrust Division of the U.S.Department of Justice use four-firm concentration ratios as measures of concentration.

Which one of the following is not a possible barrier to entry high enough to keep competing firms out of a monopoly industry?

In regulating a natural monopoly, the price strategy that ensures the highest possible output and zero profit is one that sets price

Explain why the monopolist has no supply curve?

Suppose a monopoly is producing its profit-maximizing output level.Now suppose the government imposes a lump-sum tax on the monopoly, independent of its output.As a result the monopolist will increase the price of its product to cover its higher cost.

In discussions of barriers to entry, what is meant by the term "virtuous cycle"?

A merger between U.S.Steel and General Motors would be an example of a