Chapter 15

11 October 2022
4.7 (114 reviews)
49 test answers

Unlock all answers in this set

Unlock answers (45)
question
A form of market structure studied by economists is monopoly. When is a firm a? monopoly, or are monopolies only theoretical concepts that do not? exist?
answer
A firm is a monopoly if it can ignore the actions of all other firmsA firm is a monopoly if it can ignore the actions of all other firms.
question
A form of market structure studied by economists is monopoly. When is a firm a? monopoly, or are monopolies only theoretical concepts that do not? exist?
answer
A firm is a monopoly if its economic profits are not competed away in the long run.
question
For many? years, the Aluminum Company of America left parenthesis Alcoa right parenthesisthe Aluminum Company of America (Alcoa) essentially operated as a monopoly. What made this company a monopoly The Aluminum Company of America left parenthesis Alcoa right parenthesisThe Aluminum Company of America (Alcoa) was essentially a monopoly because
answer
it had almost exclusive control of the? world's supply of bauxite, used to make aluminumaluminum.
question
Governments often have the potential to influence whether firms are monopolies How might the government affect whether a firm is a? monopoly? The government could
answer
grant a patent to a firm comma giving it the exclusive right to produce a product grant a patent to a firm, giving it the exclusive right to produce a product.
question
The figure to the right illustrates market demand for a monopoly along with its average total cost? (ATC) curve. Is the monopoly a natural monopoly The firm
answer
A. is a natural monopoly because it can supply the entire market at lower average total cost than can two or more firms.
question
One firm can supply 1818 units of output for ?$11 less per unit in average total cost than two firms
answer
1
question
To have a? monopoly, barriers to entering the market must be so high that no other firms can enter. Do network externalites create or remove barriers to? entry? Explain. Network externalities
answer
create barriers to entry because if a firm can attract enough customers? initially, it can attract additional customers as its? product's value increases by more people using? it, which attracts even more customers.
question
Why does the government issue? patents? The government issues patents
answer
To encourage firms to spend money on the research and development necessary to create new products.
question
A patent is the exclusive right to a product for a period of years from the date the patent is filed with the government.
answer
20
question
Give an example of a public franchise and an example of a public enterprise. An example of a public franchise is
answer
a firm that is the? sole, government-designated provider of waterwater?, and an example of a public enterprise is the government directly providing waterwater.
question
Many firms might like to be monopolies because such firms earn economic profits in the long run. What might cause a? monopoly? A firm is likely to be a monopoly if
answer
there are important network externalities in supplying the good or service there are important network externalities in supplying the good or service.
question
Many firms might like to be monopolies because such firms earn economic profits in the long run. What might cause a? monopoly? A firm is likely to be a monopoly if
answer
that firm has control of a key resource necessary to produce a good or service that firm has control of a key resource necessary to produce a good or service.
question
Many firms might like to be monopolies because such firms earn economic profits in the long run. What might cause a? monopoly? A firm is likely to be a monopoly if
answer
economies of scale are so large that the firm has a natural monopoly economies of scale are so large that the firm has a natural monopoly.
question
Many firms might like to be monopolies because such firms earn economic profits in the long run. What might cause a? monopoly? A firm is likely to be a monopoly if
answer
there are important network externalities in supplying the good or servicethere are important network externalities in supplying the good or service.
question
Describe a? monopoly's demand curve. A? monopoly's demand curve
answer
is the same as the demand curve for the product.
question
What happens if a perfectly competitive industry becomes a? monopoly? Suppose the demand curve in the figure is market demand and the corresponding market supply curve represents the marginal cost of production. Compared to perfect? competition, a? profit-maximizing monopoly would ? decreaseincrease output by nothing units.
answer
decrease by 2
question
In? addition, a monopoly would lower raise price by ?$nothing.
answer
raise $1
question
Concept: Comparing Economic Efficiency Question Help Which are more economically? efficient, perfectly competitive markets or? monopolies? Compared to? monopolies, perfectly competitive markets are
answer
more economically efficient because they result in more economic surplus.
question
Is the loss in efficiency due to market power large or? small? Explain. The loss in efficiency due to market power is
answer
small because competition limits market power comma even when the market is not perfectly competitive
question
What effect might market power have on technological? change? Market power results in
answer
economic profits that can be spent on research to develop new products.
question
What is the? government's policy on collusion in the United? States? Explain the rationale for this policy. In the United States
answer
The government makes collusion illegal with antitrust laws because monopolies reduce economic efficiency reduce economic efficiency.
question
The Department of Justice and the Federal Trade Commission must define the relevant market when determining whether to allow a merger. How do economists identify the relevant? market? The relevant market has been identified if
answer
a price increase results in higher? profits; otherwise, the market is too narrow.
question
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?
answer
entry blocked by government action
question
After having a monopoly in the diamond market for many? years, by? 2000, De Beers faced competition from other companies. To maintain its market? share, De Beers
answer
adopted a strategy of differentiating its diamonds. Each of its diamonds is now marked with a microscopic brand.
question
Refer to the diagram to the right which shows the demand and cost curves facing a monopolist. To maximize? profit, the firm will produce at output level
answer
q2
question
Refer to the diagram to the right which shows the demand and cost curves facing a monopolist. The? firm's profit maximizing price is
answer
p3
question
Refer to the diagram to the right which shows the demand and cost curves facing a monopolist. If the? firm's average total cost curve is ATC1?, the firm will
answer
make a profit
question
Refer to the diagram to the right which shows the demand and cost curves facing a monopolist. If the? firm's average total cost curve is ATC3?, the firm will
answer
suffer a loss
question
Assume the table above gives the monthly demand and costs for subscriptions to basic cable for? Comcast, a cable television monopoly in Philadelphia. If Comcast maximizes its profits how much profit will it? earn?
answer
4
question
Market power refers to
answer
the ability of a firm to charge a price higher than the marginal cost of production.
question
A market economy benefits from market power
answer
if firms with market power do research and development with the profits earned.
question
The Clayton Act prohibited
answer
any merger if its effect was to substantially lessen competition or create a monopoly.
question
A merger between the Ford Motor Company and General Motors would be an example of a
answer
horizontal merger.
question
A possible advantage of a horizontal merger for the economy is that
answer
the merged firm might reap economies of scale which could translate into lower prices.
question
To have a monopoly in an industry there must be
answer
barriers to entry so high that no other firms can enter the industry.
question
A patent or copyright is a barrier to entry based on
answer
government action to protect a producer.
question
?$80 0 $80 Shakti Inc. has been granted a patent for its arnica toothache balm. The table to the right shows the demand and the total cost schedule for the firm. What is the amount of? Shakti's profit?
answer
68
question
Refer to the diagram to the right which shows the demand and cost curves facing a monopolist.
To maximize? profit, the firm will produce at output level
Refer to the diagram to the right which shows the demand and cost curves facing a monopolist. To maximize? profit, the firm will produce at output level
answer
q2
question
The most profitable price for a monopolist is
answer
found where the? profit-maximizing quantity hits the demand curve.
question
What is the definition of? monopoly?
answer
all of the above
question
The Department of Justice and the Federal Trade Commission use the HHI calculation for a market to evaluate proposed horizontal mergers. For? example, if the? post-merger HHI is below 1,5001,500?, then the market is not? concentrated, so mergers in them are not? challenged; however, at the other? extreme, if the? post-merger HHI is above 2,5002,500?, then the market is highly? concentrated, and mergers that increase the HHI by 100 to 200 points may be challenged and mergers that increase the HHI by more than 200 points will likely be challenged.
answer
1500 2500
question
Refer to the diagram to the right which shows the demand and cost curves facing a monopolist.
The? firm's profit maximizing price is
Refer to the diagram to the right which shows the demand and cost curves facing a monopolist. The? firm's profit maximizing price is
answer
p3
question
Refer to the diagram to the right which shows the demand and cost curves facing a monopolist.
If the? firm's average total cost curve is ATC1?, the firm will
Refer to the diagram to the right which shows the demand and cost curves facing a monopolist. If the? firm's average total cost curve is ATC1?, the firm will
answer
make a profit
question
?Peet's Coffee and Teas produces some flavorful varieties of? Peet's brand coffee. Is? Peet's a? monopoly?
answer
No, although? Peet's coffee is a unique? product, there are many different brands of coffee that are very close substitutes.
question
For many? years, the Aluminum Company of America left parenthesis Alcoa right parenthesisthe Aluminum Company of America (Alcoa) essentially operated as a monopoly. What made this company a monopoly The Aluminum Company of America left parenthesis Alcoa right parenthesisThe Aluminum Company of America (Alcoa) was essentially a monopoly because
answer
it had almost exclusive control of the? world's supply of bauxitebauxite?, used to make aluminumaluminum.
question
What is the? government's policy on collusion in the United? States? Explain the rationale for this policy. In the United States
answer
the government makes collusion illegal with antitrust laws because monopolies reduce economic efficiency reduce economic efficiency.
question
Is the loss in efficiency due to market power large or? small? Explain. The loss in efficiency due to market power is
answer
small because firms with substantial market power are rare firms with substantial market power are rare.
question
Why does the government issue? patents? The government issues patents
answer
to encourage firms to spend money on the research and development necessary to create new products.
question
How long do patents? last?
answer
20