Chapter 9: Q.10 (page 232)
What is a legal monopoly?
A monopoly set up by law is referred to as legal monopoly.
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If Congress reduced the period of patent protection from 20 years to 10 years, what would likely happen to the amount of private research and development?
2. Classify the following as a government-enforced barrier to entry, a barrier to entry that is not government-enforced, or a situation that does not involve a barrier to entry.
a. A city passes a law on how many licenses it will issue for taxicabs
b. A city passes a law that all taxicab drivers must pass a driving safety test and have insurance
c. A well-known trademark
d. Owning a spring that offers very pure water
e. An industry where economies of scale are very large compared to the size of demand in the market
What is a barrier to entry? Give some examples.
Imagine a monopolist could charge a different price to every customer based on how much he or she were willing to pay. How would this affect monopoly profits?
Suppose the demand for a monopoly’s product falls so that its profit-maximizing price is below average variable cost. How much output should the firm supply?
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