Eco 201

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Eco 201
2011-12-05 16:19:55

Monopoly Firms
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  1. Few firms in the US are monopolies because
    when a firm earns profits, other firms will enter its market
  2. A narrow definition of monopoly is that a firm is a monopoly if it can ignore
    The actions of all other firms
  3. Which two factors make regulating mergers complicated
    first it is not always clear what market firms are in. Second the newly merged firm mich be more effecient than the merging firms were individually
  4. Some economists argue that Microsoft became a monopoly in the market for computer software by developing MS-DOS an operating system used for the first IBM personal computers. The more people who used MS-DOS based programs the greater the usefulness of using a computer with an MS-DOS operating system. The explantion for Microsoft monopoly is
    network externalities
  5. When the government wants to give an exclusive right to one firm to produce a product, it
    grants a patent or copyright to an individual or firm
  6. A patent
    gives a firm the exclusive right to a new product for 20 years from the date the product is invented
  7. Ordinarily, governments attempt to promote competition in markets. Why do governments use patents to block entry into some markets when this prohibits competition?
    Patents encourage firms to spend money on research necessary to create new products
  8. The Nickel Co. of Canada is often cited as an example of monopoly. What was the source of the barrier to entry that gave this firm monopoly power?
    Control of a key resource
  9. Why are laws aimed at regulating monopolies called "antitrusts" laws
    In the 1800's firms in several industries formed trusts; the firms were independent but gave effective control of the industry to a board of trustees. Antitrust laws were passed to regulate these trusts.
  10. In the other contries soccer leagues are generally more competitive than American football and baseball legues due to
    league membership being subject to annual promotion from or relegation to the lower leagues for some of the member teams
  11. To be a natural monopoly a firm must
    Have economies of scale that are so large that it can supply the entire market at a lower cost
  12. A monopoly firm demand curve
    is the same as the market demand curve
  13. Firms that face downward sloping demand curves for their output in the product market are called
    Price makers
  14. Assure a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. Which of the following statements comparing the conditions in the industry under both market structures is true?
    A monopoly will produce less and charge a higher price than would a perfectly competitive industry producing the same good
  15. In evaluating the degree of economic efficiency in a market, we can state that the size of the deadweight loss in a market will be smaller
    the smaller the difference between marginal cost and marginal price