Exam 15: Monopoly and Antitrust Policy

A public franchise

A monopolist's profit maximizing price and output correspond to the point on a graph

Article Summary Arguing that a merger would lead to higher prices, reduced service, and significantly less competition, the Justice Department and attorneys general from 6 states and the District of Columbia filed a lawsuit in August to challenge the pending merger of American Airlines and US Airways. The lawsuit took some by surprise as the Justice Department has in recent years approved the mergers of Delta with Northwest and United with Continental. The European Union approved the merger in August, and American and US Airways had hoped to complete the merger by September. Source: Even Perez, "US government seeks to block American-US Airways merger," CNN.com, August 13, 2013. -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 American Airlines and US Airways are based on market concentration as determined by the

Consider an industry that is made up of nine firms each with a market share (percent of sales)as follows: a.Firm A: 30% b.Firm B: 20% c.Firms C,D and E: 10% each d.Firms F,G,H and J: 5% each What is the value of the four-firm concentration ratio and how is the industry categorized?

In Walnut Creek,California,there are three very popular supermarkets: Safeway,Whole Foods and Lunardi's.While Safeway remains open twenty-four hours a day,Whole Foods and Lunardi's close at 9 pm.Which of the following statements is true?

A monopolist currently sells 18 units of a good.If marginal revenue on the last unit sold is $117,then the price of the good must be less than $117.

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 monopoly's profit will fall.

Arnold Harberger was the first economist to estimate the loss of economic efficiency due to market power.Since Harberger's findings were published,other researchers have studied this same issue.How do the results of these researchers compare to Harberger's results?

In reality,because few markets are perfectly competitive,some loss of economic efficiency occurs in the market for nearly every good or service.

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

The 10-year protection period from generic competition for drug manufacturers is a form of

Some economists argue that Microsoft become 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

Figure 15-14 -Refer to Figure 15-14.From the monopoly graph above,identify the following: a.The profit maximizing price b.The profit maximizing quantity c.The area representing deadweight loss d.The area representing the transfer of consumer surplus to the monopoly

Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist. -Refer to Figure 15-4.What is the price charged for the profit-maximizing output level?

Governments grant patents to

Identify the type of merger in each of the following situations and indicate how the post-merger concentration ratio for the industry is affected. a.A steel company merges with a coal and iron ore mining company.b.Staples,a retailer of office supplies,acquires Office Depot,another retailer of office supplies.c.An oil company merges with pipeline,shipping,and railroad companies as well as refineries and gas stations.

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

Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale.The main reason for the elimination of profits is

Which of the following statements is consistent with the views of Joseph Schumpeter?

Table 15-2 The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes. Table 15-2 shows the cost and demand data for this government protected monopolist. -Refer to Table 15-2.What is the profit-maximizing quantity and price for the monopolist?