Chapter 9: Q.9 (page 232)
What is a natural monopoly?
A natural monopoly is a monopoly created because of high fixed cost or economies of scale.
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What legal mechanisms protect intellectual property?
What is a barrier to entry? Give some examples.
1. 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 patented invention b. A popular but easily copied restaurant recipe c. An industry where economies of scale are very small compared to the size of demand in the market d. A well-established reputation for slashing prices in response to new entry e. A well-respected brand name that has been carefully built up over many years
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 local electrical utility, a legal monopoly based on economies of scale, was split into four firms of equal size, with the idea that eliminating the monopoly would promote competitive pricing of electricity. What do you anticipate would happen to prices?
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