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Exam 15: Monopoly and Antitrust Policy

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Question 1

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In 2014,the NCAA was the subject of two antitrust lawsuits related to video games.The NCAA reached a settlement in which it agreed to

A) stop authorizing the production of NCAA-branded video games.
B) allow schools to pay athletes so it could continue to use their images in the video games.
C) pay current and former athletes whose names or images had been used in NCAA-branded video games.
D) split into two separate entities,one which monitors college athletics and the other which markets products.

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

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Question 2

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

A) copyright.
B) trademark.
C) hallmark.
D) patent.

E) B) and D)
F) A) and D)

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Question 3

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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?

If a monopolist's marginal revenue is $35 per unit and its marginal cost is $25,then

$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Quantity per } \\\text { Day (cases) }\end{array} & \begin{array} { c } \text { Price per } \\\text { Case }\end{array} & \text { Total Cost } \\\hline 1 & \$ 16 & \$ 7.00 \\\hline 2 & 15 & 9.50 \\\hline 3 & 14 & 11.00 \\\hline 4 & 13 & 12.00 \\\hline 5 & 12 & 14.50 \\\hline 6 & 11 & 17.50 \\\hline 7 & 10 & 21.00 \\\hline 8 & 9 & 25.00 \\\hline 9 & 8 & 30.00 \\\hline 10 & 7 & 35.50 \\\hline\end{array}$ 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?

A patent or copyright is a barrier to entry based on

Provide two examples of a government barrier to entry.

$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Quantity per } \\\text { Day (cases) }\end{array} & \begin{array} { c } \text { Price per } \\\text { Case }\end{array} & \text { Total Cost } \\\hline 1 & \$ 16 & \$ 7.00 \\\hline 2 & 15 & 9.50 \\\hline 3 & 14 & 11.00 \\\hline 4 & 13 & 12.00 \\\hline 5 & 12 & 14.50 \\\hline 6 & 11 & 17.50 \\\hline 7 & 10 & 21.00 \\\hline 8 & 9 & 25.00 \\\hline 9 & 8 & 30.00 \\\hline 10 & 7 & 35.50 \\\hline\end{array}$ 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 amount of profit that the firm earns?

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

Consider the following characteristics: a. A market structure with barriers to entry B.demand curves that are easily identified C.firm cannot make zero profits in the long run D.firm can reap long-run profits. Which of the characteristics in the list above is shared by an oligopolist and a monopolist?

U.S.antitrust laws are designed to prohibit monopolization and encourage competition.Why,then,does the government erect barriers to entry and create monopoly power by granting firms patents?

Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.If the government regulates Erickson Power Company so that the firm can earn a normal profit,the price would be set at ________ and the output level is ________.

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

A merger between the Ford Motor Company and General Motors would be an example of a

If a monopolist's price is $50 per unit and its marginal cost is $25,then

Baxter International,a manufacturer of hospital supplies,acquired American Hospital Supply,a distributor of hospital supplies.This is an example of

a.What is the defining characteristic of a natural monopoly? b.Should the government break up a natural monopoly into two or more firms to make the industry more competitive? c.Suppose the government wants to ensure that some of the benefits of declining average total cost are passed on to consumers.To achieve this goal,it requires that the natural monopoly set its price equal to marginal cost.Is this a feasible goal? Explain. d.What is an alternative to marginal cost pricing that ensures that consumers reap some of the benefits of declining average total cost?

If a restaurant was a natural monopoly,dividing the restaurant equally into two separate restaurants would

If a firm is a natural monopoly,competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit.How are prices usually set in natural monopoly markets in the United States?

Figure 15-17 Your college decides to offer a psychology course as a MOOC that can be taken by students anywhere in the world,whether they are actually enrolled in your college or not.The demand and cost situation for the MOOC is shown in the figure. -Refer to Figure 15-17.An economics professor argues: "I think the course should be priced so as to achieve economic efficiency." How much profit (or loss) will the college make on the course if it charges this price?