Question

1. Janet knows a lot of people who do not like? Marmite®, a yeast extract that is used as a spread on toast. She says that Marmite is so unpopular that? Unilever, the company that manufactures? Marmite®, cannot possibly have any monopoly power.

Do you agree with this? analysis?

A.

?No, monopoly power is based on whether a good has any close? substitutes, not whether your friends like the product.

B.

?Yes, if a good is not widely liked by? consumers, the producer does not have a monopoly in that good.

C.

?No, producing? Marmite® requires low fixed? costs, so it is likely a regulated natural monopoly that has market power.

D.

?Yes, since other yeast spreads must be preferred to? Marmite®, it cannot have a monopoly.

Edgar says that a single firm in the wind power industry is unlikely to have a significant degree of monopoly power for an extended period of time. Since the cost of producing an additional unit of wind energy is so? low, a large number of firms can enter the market and compete away economic profits.

Do you agree with this? analysis?

A.

?Yes, if the cost of producing wind energy is? low, then firms will enter the? market, indicating no barriers to? entry, so the firm cannot be a monopoly.

B.

?Yes, since diseconomies of scale are likely? present, the firm cannot be a monopoly.

C.

?No, Edgar's argument ignores potentially large fixed costs that will act as a barrier to entry.

D.

?No, there are no close substitutes for wind power so producers of this good will have monopoly power.

2. Suppose the government grants an individual or company the

exclusive right to intellectual propertyexclusive right to intellectual property.

In this? case, the government is granting a

A.copyright

B.patent.

Which of the following is not likely covered by a? copyright?

A.

A new song.

B.

A photograph.

C.

A work of art.

D.

A way to improve an existing machine.

3. Antitrust policy started with the? ____________, which prohibited any agreements or actions that would put restraints on trade.

A.

Monopoly Act of 1914.

B.

Sherman Act of 1890.

C.

Wilson Act of 1914.

D.

Roosevelt Act of 1890.

4.

Compared to a perfectly competitive? market, the price in a monopoly market is

?

higher

the same

lower

and quantity is

?

higher

lower

the same

.

If a monopolist loses its monopoly? power, what happens to price and? surplus?

If the monopolist loses its monopoly? power, price

?

stays the same

decreases

increases

?, consumer surplus

?

increases

stays the same

decreases

?, producer surplus

?

stays the same

decreases

increases

?, and social surplus

?

stays the same

increases

decreases

.

Social surplus increases because? ____________.

A.

deadweight loss is eliminated.

B.

demand increases.

C.

consumers now capture all surplus.

D.

the marginal cost drops.

Answer 1

1) ?No, monopoly power is based on whether a good has any close? substitutes, not whether your friends like the product.

2) ?No, Edgar's argument ignores potentially large fixed costs that will act as a barrier to entry.

3) Suppose the government grants an individual or company the exclusive right to intellectual property exclusive right to intellectual property. In this? case, the government is granting a copyright.

4) A way to improve an existing machine is not likely to be covered by copyright but by a patent.

5) Antitrust policy started with the? Sherman Act of 1890.

6) Compared to a perfectly competitive? market, the price in a monopoly market is higher and quantity is lower.

7) If the monopolist loses its monopoly? power, price decreases and consumer surplus increases and producer surplus decreases and social surplus increases.

8) Social surplus increases because deadweight loss is eliminated.