Question 1

Figure 15-17 
-Consider two industries, industry Q and industry Z. In industry Q there are 10 companies, each with a market share of 10% of total sales. In industry Z, there are eight companies. One company has a 65% market share and each of the other seven firms has a market share of 5%.
a. Calculate the four-firm concentration ratio for each industry.
b. Calculate the Herfindahl-Hirschman Index (HHI) for each industry.
c. What do the values of the two concentration measures imply about the degree of market power in the two industries?

Accepted Answer

The answer of Figure 15-17 
-Consider two industries, industry Q...

Question 2

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?

Accepted Answer

The answer of a. What is the defining characteristic of...

Question 3

a. What is the difference between a horizontal merger and a vertical merger?
b. Give an example of each type of merger.
c. Could a horizontal merger be welfare improving?

Accepted Answer

The answer of a. What is the difference between a...

Question 4

The term "trust" in antitrust refers to a board of trustees that has collusive control over different companies.

Accepted Answer

The answer of The term "trust" in antitrust refers to...

Question 5

Economic efficiency requires that a natural monopoly's price be set corresponding to the quantity where marginal revenue equals marginal cost.

Accepted Answer

The answer of Economic efficiency requires that a natural monopoly's...

Question 6

Consider two industries, industry W and industry X. In industry W there are five companies, each with a market share of 20% of total sales. In industry X, there are six companies. One company has a 50% market share and each of the other five firms has a market share of 10%.
a. Calculate the four-firm concentration ratio for each industry.
b. Calculate the Herfindahl-Hirschman Index (HHI) for each industry.
c. What do the values of the two concentration measures imply about the degree of market power in the two industries?

Accepted Answer

The answer of Consider two industries, industry W and industry...

Question 7

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions.

Accepted Answer

The answer of Local or state offices of the Department...

Question 8

Figure 15-17 
-Refer to Figure 15-17 to answer the following questions.
a. What quantity will this monopoly produce and what price will it charge?
b. Suppose the government decides to regulate this monopoly and imposes a price ceiling of $25. Now what quantity will the monopoly produce and what price will it charge?
c. Will every consumer who is willing to pay the ceiling price of $25 be able to buy the product? Briefly explain.

Accepted Answer

The answer of Figure 15-17 
-Refer to Figure 15-17 to...

Question 9

Identify two ways by which the government controls monopolies?

Accepted Answer

The answer of Identify two ways by which the government...

Question 10

Figure 15-18 
-Refer to Figure 15-18 to answer the following questions.
a. What quantity will this monopoly produce and what price will it charge?
b. Suppose the monopoly is regulated. If the regulatory agency wants to achieve economic efficiency, what price should it require the monopoly to charge?
c. To achieve economic efficiency, what quantity will the regulated monopoly produce?
d. Will the regulated monopoly make a profit if it charges the price that will achieve economic efficiency?
e. Suppose the government decides to regulate the monopoly by imposing a price ceiling of $35. What quantity will the monopoly produce and what price will the monopoly charge?
f. With the price ceiling of $35, what profit will the monopoly earn?

Accepted Answer

The answer of Figure 15-18 
-Refer to Figure 15-18 to...

Question 11

Identify the type of merger in each of the following situations and indicate how the post-merger concentration ratio for the industry is affected.
a. A steel company merges with a coal and iron ore mining company.
b. Staples, a retailer of office supplies, acquires Office Depot, another retailer of office supplies.
c. An oil company merges with pipeline, shipping, and railroad companies as well as refineries and gas stations.

Accepted Answer

The answer of Identify the type of merger in each...

Quiz 15: Monopoly and Antitrust Policy

a. What is the difference between a horizontal merger and a vertical merger? b. Give an example of each type of merger. c. Could a horizontal merger be welfare improving?

The term "trust" in antitrust refers to a board of trustees that has collusive control over different companies.

Economic efficiency requires that a natural monopoly's price be set corresponding to the quantity where marginal revenue equals marginal cost.

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions.

Identify two ways by which the government controls monopolies?