Problem 1
"No firm is completely sheltered from rivals; all firms compete for consumer dollars. If that is so, then pure monopoly does not exist." Do you agree? Explain. How might you use Chapter 6 's concept of cross elasticity of demand to judge whether monopoly exists? \lfloor 012.1
Problem 2
Discuss the major barriers to entry into an industry. Explain how each barrier can foster either monopoly or oligopoly. Which barriers, if any, do you feel give rise to monopoly that is socially justifiable? LO12.2
Problem 3
How does the demand curve faced by a purely monopolistic seller differ from that confronting a purely competitive firm? Why does it differ? Of what significance is the difference? Why is the pure monopolist's demand curve not perfectly inelastic? \(L O 12.3\)
Problem 4
Assume that a pure monopolist and a purely competitive firm have the same unit costs. Contrast the two with respect to (a) price, \((b)\) output, \((c)\) profits, \((d)\) allocation of resources, and \((e)\) impact on income transfers. Since both monopolists and competitive firms follow the \(\mathrm{MC}=\mathrm{MR}\) rule in maximizing profits, how do you account for the different results? Why might the costs of a purely competitive firm and those of a monopolist be different? What are the implications of such a cost difference? LO12.5
Problem 7
U.S. pharmaceutical companies charge different prices for prescription drugs to buyers in different nations, depending on elasticity of demand and government-imposed price ceilings. Explain why these companies, for profit reasons, oppose laws allowing re-importation of drugs to the United States. LO12. 6
Problem 8
Explain verbally and graphically how price (rate) regulation may improve the performance of monopolies. In your answer distinguish between ( \(a\) ) socially optimal (marginal-cost) pricing and \((b)\) fair-return (average-total-cost) pricing. What is the "dilemma of regulation"? 10127
Problem 9
It has been proposed that natural monopolists should be allowed to determine their profit-maximizing outputs and prices and then government should tax their profits away and distribute them to consumers in proportion to their purchases from the monopoly. Is this proposal as socially desirable as requiring monopolists to equate price with marginal cost or average total cost? \(L O 12.7\)
Problem 10
LAST WORD Using Big Data to set personalized prices cannot be done with 100 percent precision. What would happen if personalized prices were set higher than customers' reservation prices? Would this possibility reduce the incentive to set the highest possible personalized prices? How can consumers protect themselves from personalized prices?
