Question 1

Often,if a monopoly exists,other firms try to figure out how to break it up - to get a share of the monopolist's profit.Describe two things firms do to try to enter a monopolized industry.Give an example of each.

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Question 2

Demonstrate graphically and explain verbally why there is an incentive for suppliers to get together to restrict supply.As part of your explanation discuss why consumers-even though they are hurt by this-typically don't fight it.

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Question 3

A sizeable proportion of corporate takeovers are financed with so-called junk bonds.Such bonds offer bondholders higher rates of return than most other bonds traded because there are no hard assets as collateral to reduce the risk for bondholders in case of a default.The sellers of the bonds hope to be able to meet their obligations to pay these high rates of return to bondholders through the expected increase in profits of the company(ies)just taken over.How do the monitoring problem and the existence of lazy monopolists contribute to the market for junk bonds?

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Question 4

Having just graduated from college,you accept a position with a large corporation as an entry-level sales manager.After a few weeks on the job,you observe that many of your senior colleagues are not working very hard,but make a lot more money than you do.You remember learning about the "motivating discipline" of corporate takeovers within your Economics courses.Draft a memo to your colleagues explaining how corporate takeovers might impact their lives if they don't alter their behavior.Why might you hesitate to write such a letter?

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Question 5

Consider the following advertisement: "We will pay you $13 to buy a light bulb that pays for itself." The coupon necessary to take advantage of this offer was available only at offices at the local electric company.Why do you think the electric company would make such an offer?

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Question 6

Economists describe competition as a market structure,a specific type of institutional arrangement.In what other way can the term "competition" be used? Explain your answer.

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Question 7

Demonstrate graphically and explain verbally what is meant by the term X-inefficiency.

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Question 8

Once a firm has a monopoly it often has to worry about other firms trying to get a piece of its action.Describe three things monopolists do to try to keep other firms from getting a share of their markets.Discuss how much a monopolist would spend on any of these tactics.

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Quiz 16: Real-World Competition and Technology