Question

Answer and explain in couple sentences whether the following statements are true, false, or uncertain:

1.) The owner of a copyright is the only person/entity with the legal right to make a copy of a creative work; therefore, a copyright effectively grants its owner a monopoly for the work in question. This allows the copyright owner to charge a price that exceeds marginal cost, which in turn causes deadweight loss compared to a world without copyright laws. (The first sentence is true and provided for background. You should address the second sentence.)

2.) Relative to monopoly pricing, oligopoly pricing increases producers’ profits (there are more producers, so there are more profits), increases consumer surplus, and increases social surplus. (Be sure to address all three things: profits, consumer surplus, and producer surplus.)

Answer 1

1 - True

The copyright is a barrier to entry created in the monopoly market. This allows the seller in monopoly to charge a greater than MC price and earn positive economic profits. This reduces the consumer surplus and creates deadweight loss in market

2 - False

The producer surplus is greater in monopoly , and not oligopoly. The greater number of producers , reduces the producer surplus as the market surplus is divided among these producers. Hence the said statement is false.