1. 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?
2.
Price per Unit
Quantity Demanded
(units)
Total Cost of Production
(dollars)
$85
10
$530
80
11
540
75
12
550
70
13
560
65
14
575
60
15
595
55
16
625
A monopoly producer of foreign language translation software faces a demand and cost structure as given in the table above.
a) What is the marginal revenue from the sale of the 12th unit?
b) What is the firm's profit-maximizing output and what is the price charged to sell this output?
c) What is the amount of the firm's profit?
3. If McDonald's bought Burger King,
a) Would this be an example of a horizontal merger or a vertical merger?
b) Would the concentration ratio for the fast-food industry change as a result of this merger? Why or why not?
1. 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?
2.
|
Price per Unit |
Quantity Demanded (units) |
Total Cost of Production (dollars) |
|
$85 |
10 |
$530 |
|
80 |
11 |
540 |
|
75 |
12 |
550 |
|
70 |
13 |
560 |
|
65 |
14 |
575 |
|
60 |
15 |
595 |
|
55 |
16 |
625 |
A monopoly producer of foreign language translation software faces a demand and cost structure as given in the table above.
a) What is the marginal revenue from the sale of the 12th unit?
b) What is the firm's profit-maximizing output and what is the price charged to sell this output?
c) What is the amount of the firm's profit?
3. If McDonald's bought Burger King,
a) Would this be an example of a horizontal merger or a vertical merger?
b) Would the concentration ratio for the fast-food industry change as a result of this merger? Why or why not?
Related textbook solutions
Related questions
1. How does the profit maximization condition for a monopoly differ from that for a perfectly competitive firm? How does this difference impact efficiency under each market structure?
2. A perfectly competitive firm has the following fixed and variable costs in the short-run. The market price for the firm's product is $140.
Output FC VC TC TR Profit/Loss
0 $90 $0 90 0 (90)
1 90 90 180 140 (40)
2 90 170 260 280 20
3 90 290 380 420 40
4 90 430 520 560 40
5 90 590 680 720 20
6 90 770 860 840 (20)
a. Complete the table.
b. What level of output should the firm produce to maximize profits?
c. Assume this firm is making a loss when it produces its 7th unit of output. What should the firm do in the short-run?
Ā
3. The following table provides market share information about the soft-drink industry.
| Company | Market Share |
| Coca-Cola | 37% |
| Pepsi-Co | 35% |
| Cadbury Schweppes | 17% |
| Other | 11% |
a. Do you think the Department of Justice and the Federal Trade Commission would approve a merger between any two of the first three companies listed? Explain.
b. Do you think this market has barriers to entry? If so, what might they be?
