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Exam 15: Monopoly and Antitrust Policy

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Question 131

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Table 15-4 Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows the demand and the total cost schedule for the firm. -Refer to Table 15-4. What is the economically efficient output level?

A) 5 units
B) 6 units
C) 7 units
D) 8 units

E) C) and D)
F) A) and D)

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Question 132

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Figure 15-10 -Refer to Figure 15-10. What is the area that represents consumer surplus under a monopoly?

A) the triangle P₀P₁F
B) the triangle P₀P₂E
C) the area P₁P₂EF
D) the rectangle P₁P₃HF

E) A) and C)
F) All of the above

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Question 133

Multiple Choice

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A local electricity-generating company has a monopoly that is protected by an entry barrier that takes the form of

A merger between firms at different stages of production of a good

Figure 15-13 -Refer to Figure 15-13. From the monopoly graph above, identify the area representing the deadweight loss. Would the deadweight loss be larger if the demand curve was more elastic or less elastic?

Beginning in 1965, the head of the Antitrust Division of the U.S. Department of Justice began to change antitrust policy. How did antitrust policy change?

The first important federal law passed to regulate monopolies in the United States was the

Equilibrium in a perfectly competitive market results in the greatest amount of economic surplus, or total benefit to society, from the production of a good. Why, then, did Joseph Schumpeter argue that an economy may benefit more from firms that have market power than from firms that are perfectly competitive?

A profit-maximizing monopoly produces a lower output level than would be produced if the industry was perfectly competitive.

Figure 15-8 Figure 15-8 reflects the cost and revenue structure for a monopoly that has been in business for a very long time. -Refer to Figure 15-8. Use the figure above to answer the following questions. a. Identify the curves labeled A and B. Identify the curve which contains both point Y and point Z. Identify the curve which contains both point V and point W. b. What is the profit-maximizing quantity and what price will the monopolist charge? c. What area represents total revenue at the profit-maximizing output level? d. What area represents total cost at the profit-maximizing output level? e. What area represents profit? f. What is the profit per unit (average profit) at the profit-maximizing output level? g. If this industry was organized as a perfectly competitive industry, what would be the profit-maximizing price and quantity? h. What area represents the deadweight loss as a result of a monopoly?

Market power in the United States causes a huge loss of economic efficiency.

Governments grant patents to encourage

Table 15-1 A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 15-1. -Refer to Table 15-1. What is the firm's profit-maximizing output and what is the price charged to sell this output?

A Herfindahl-Hirschman Index is calculated by

Table 15-1 A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 15-1. -Refer to Table 15-1. What is the marginal revenue from the sale of the 12th unit?

Long-run economic profits would most likely exist in which market structure?

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?

Wendell can sell five motor homes per week at a price of $22,000. If he lowers the price of motor homes to $20,000 per week he will sell six motor homes. What is the marginal revenue of the sixth motor home?

Table 15-4 Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows the demand and the total cost schedule for the firm. -Refer to Table 15-4. What is the amount of the deadweight loss generated by Shakti when it produces the monopoly output?

Network externalities