Exam 10: Monopoly and Antitrust Policy

Consider two industries,industry Q and industry Z.In industry Q there are 10 companies,each with a market share of 10% of total sales.In industry Z,there are eight companies.One company has a 65% market share and each of the other seven firms has a market share of 5%. a.Calculate the four-firm concentration ratio for each industry. b.Calculate the Herfindahl-Hirschman Index (HHI)for each industry.

Table 10-1 Price per Unit Quantity Demanded (units) Total Cost of Production (dollars) \ 85 10 \ 530 80 11 540 75 12 550 70 13 560 65 14 575 60 15 595 55 16 625 A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 10-1 -Refer to Table 10-1.What is the marginal revenue from the sale of the 12th unit?

Peet's Coffee and Teas produces some flavorful varieties of Peet's brand coffee.Is Peet's a monopoly?

Figure 10-16 Figure 10-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 10-16.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of ________ and charge a price of ________.

Table 10-3 Price Quantity Total Revenue Marginal Revenue Total Cost Marginal Cost \ 17 3 \ 51 \@cdots \ 56 \@cdots 16 4 64 \ 13 63 \ 7 15 5 75 11 71 8 14 6 84 9 80 9 13 7 91 7 90 10 12 8 96 5 101 11 Assume Table 10-3 gives the monthly demand and costs for subscriptions to basic cable for Comcast, a cable television monopoly in Philadelphia. -Refer to Table 10-3.If Comcast maximizes its profits how much profit will it earn?

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements regarding economic surplus in each market structure is true?

In late 2017, informed sources announced that telecommunications companies T-Mobile and Sprint were engaged in active discussions about a potential merger. The 3rd and 4th largest wireless carriers in the United States have had frequent conversations about a stock-for-stock merger, with T-Mobile parent Deutsche Telekom becoming the majority owner of the combined firms and T-Mobile CEO John Legere expected to lead the company. Part of the discussions have been whether the Department of Justice and the Federal Trade Commission would approve the merger, and based on those discussions, whether both companies will choose to proceed with a deal. Source: David Faber, "T-Mobile and Sprint are in active talks about a merger," cnbc.com, September 19, 2017. -Refer to the Article Summary.The standards used by the Department of Justice and the FTC to evaluate a potential merger such as the one between T-Mobile and Sprint are based on market concentration as determined by the

Although some economists believe network externalities are important barriers to entry,other economists disagree because

Figure 10-15 Figure 10-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 10-15.Erickson Power is a natural monopoly because

Figure 10-1 -Refer to Figure 10-1.Which of the following statements about the firm depicted in the diagram is true?

Identify two ways by which the government controls monopolies?

In a natural monopoly,throughout the range of market demand

Congress has divided the authority to police mergers between the Antitrust Division of the U.S.Department of Justice (AD)and the Federal Trade Commission (FTC).How is this authority divided?

What type of protection does U.S.law grant the creator of a book,film,or piece of music?

Microsoft hires marketing and sales specialists to decide what prices it should set for its products,whereas a wealthy corn farmer in Iowa,who sells his output in the world commodity market,does not.Why is this so?

Figure 10-4 Figure 10-4 shows the demand and cost curves for a monopolist. -Refer to Figure 10-4.What is the amount of the monopoly's profit?

If a monopolist's marginal revenue is $15 per unit and its marginal cost is $25,then to maximize profit the firm should decrease output.

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?

Many biologic drug manufacturers are pushing for patent protection to be extended to 12 years before generics are allowed to be introduced to the market.This reflects which of the following barriers to entry?

Firms do not have market power in which of the following market structures?