Exam 15: Monopoly and Antitrust Policy

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.Why won't regulators require that Erickson Power produce the economically efficient output level?

A public franchise

Article Summary In an attempt to get approval for a $6.3 billion merger with Office Depot, Staples met with FTC regulators to discuss the possible sale of assets so the merger can proceed. The Competition Bureau of the FTC had previously indicated that it would not approve the merger as initially structured, but Staples expressed optimism that it would be able to reach a settlement with the FTC. Critics have argued that a merger of Staples and Office Depot will result in higher prices for office supplies. Source: Josh Kosman, "Staples still angling for Office Max merger," New York Post, October 14, 2015. -Refer to the Article Summary above.The standards used by the Department of Justice and the FTC to evaluate a potential merger such as the one between Staples and Office Depot are based on market concentration as determined by the

Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist. -Refer to Figure 15-9.What is the difference between the monopoly output and the perfectly competitive output?

Figure 15-12 Figure 15-12 shows the cost and demand curves for a monopolist. -Refer to Figure 15-12.If this industry was organized as a perfectly competitive industry, the market output and market price would be

Suppose an industry is made up of 25 firms, all with equal market share.The four-firm concentration ratio of this industry is

Unlike a perfect competitor, a monopolist faces the market demand curve.

A monopoly is a firm that is the only seller of a good or service that does not have a close substitute.

A natural monopoly is characterized by large fixed costs relative to variable costs.

Figure 15-10 -Refer to Figure 15-10.The deadweight loss due to a monopoly is represented by the area

The International Nickel Company of Canada is often cited as an example of monopoly.What was the source of the barrier to entry that gave this firm monopoly power?

Figure 15-6 Figure 15-6 shows the cost and demand curves for a monopolist. -Refer to Figure 15-6.The profit-maximizing output and price for the monopolist are

Relative to a perfectly competitive market, a monopoly results in

Natural monopolies in the United States are generally regulated by

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?

Figure 15-7 -Refer to Figure 15-7.Use the figure above to answer the following questions. a.What is the profit-maximizing quantity and what price will the monopolist charge? b.What is the total revenue at the profit-maximizing output level? c.What is the total cost at the profit-maximizing output level? d.What is the profit? e.What is the profit per unit (average profit)at the profit-maximizing output level? f.If this industry was organized as a perfectly competitive industry, what would be the profit-maximizing price and quantity?

Governments grant patents to

The U.S.government would never approve a proposed merger between two firms that could significantly increase the newly merged firm's market power even if the efficiency gains from the newly merged firm could make consumers better off.

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.As a result of this change

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." How much profit (or loss)will the college make on the course if it charges this price?