Which of the following is more likely to increase

Info icon This preview shows pages 22–27. Sign up to view the full content.

View Full Document Right Arrow Icon
36. Which of the following is more likely to increase market power? a. Horizontal mergers b. Vertical mergers c. Stricter enforcement of antitrust laws d. Divestitures
Image of page 22

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
CHAPTER 14 | Monopoly and Antitrust Policy 409 37. Refer to the graph below. Suppose that two firms each produce with a marginal cost of MC 1 and that when the two firms merge there are efficiency gains. As presented in Figure 14-6 of the textbook, which point on the graph shows how a merger results in efficiency gains? 38. Which of the following is among the guidelines used by economists and attorneys to understand whether the government is likely to allow a merger or to oppose it? 39. What is the value of the Herfindahl-Hirschman Index (HHI) when there are four firms in an industry with each firm having an equal market share?
Image of page 23
410 40. Refer to the graph below. If regulators want to achieve economic efficiency, how will they set the monopoly price? a. At P 1 b. At P 2 c. At P 3 d. None of the above 41. Refer to the graph below. If regulators want to ensure that the owners of the monopoly are able to earn a normal rate of return on their investment, how will they set the monopoly price?
Image of page 24

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
CHAPTER 14 | Monopoly and Antitrust Policy 411 Short Answer Questions 1. The market shares of the four largest firms in Industry A are 75 percent, 2 percent, 2 percent and 1 percent. Each of the market shares of the four largest firms in Industry B equals 20 percent. Compare the four-firm concentration ratio and the Herfindahl-Hirschman Index (HHI) of concentration for both of these industries. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ 2. In the United States, regulatory commissions usually set prices for natural monopolies, such as firms selling natural gas. To achieve economic efficiency, commissions should require the firms they regulate to charge a price equal to marginal cost. If the price of natural gas was less than average total cost, could charging a price equal to marginal cost harm consumers? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ 3. Joseph Schumpeter argued that an economy may benefit from monopoly and oligopoly because firms with market power can afford costly research that leads to new technology. Perfectly competitive firms that earn zero economic profits in the long run can ill-afford to spend on research. Other economists argue that small, competitive firms have developed new products and technologies. Competition spurs firms to continually develop new products in order to stay ahead of competing firms. Are large firms with market power good or bad for an economy? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________
Image of page 25
CHAPTER 14 | Monopoly and Antitrust Policy 412 4. In the Making the Connection “The End of the Christmas Plant Monopoly,” on page 476 of the textbook, the story of the Ecke family’s development of a new variety of poinsettia plants was described. The Ecke family was able to maintain a monopoly on its poinsettias by keeping secret the technique they used to develop the plants. But the monopoly ended when a researcher
Image of page 26

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 27
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern