CHAPTER 12 and 21 NOTE TAKING ASSIGNMENT

1. List the characteristics of monopolist.

• Only producer and seller company

• It has no substitute goods or services
• The number of buyers is large
• Set the price of the good or service

2. List and explain the barriers to entry.

• Economic barriers: To enter the Market you need to invest in both the production of the
good and its advertising.
• Economies of scale: This condition is that the higher the production, the lower the price of
the additional products, being an advantage for those who are already on the market.
• Economies of scope: It is when a company with the same products can increase its level
of production, making this a threat to a new company that only offers one product.
• Product differentiation: This occurs when a company has already established itself in the
market and has an established client portfolio, forcing new companies to have to invest in
more advertising.
• Important capital needs: This is when large sums of money are required to directly
compete in the market.
• Legal barriers: This is when permits must be filled out in order to be in the market.
• Concentration of strategic assets: It is when the company that dominates the market has
access to raw materials at low prices or when it has strategic points for its production or
sale.
3. Explain why price is equal to marginal revenue in pure competition but not in a monopoly.
Include in your explanation why the marginal revenue curve is steeper than the demand
curve for a single price monopolist.

In monopoly the price can be changed by the company

The MR curve is steeper since there is no one to compete with.

4. Explain how a single-price monopolist determines the optimal price and quantity to
maximize profits.

It is determined from the profit maximization yield by means of the MR = MC

5. Explain why there will be a deadweight loss or efficiency loss with a single price monopolist.
6. List the conditions necessary for price discrimination.
• Have some market power
• Be able to recognize the different provisions to pay
• To be able to limit or avoid arbitration.

7. Complete the table below and determine the optimal price and quantity for a single-price
monopolist, assuming that production must be done in increments of 10.

Quantit Total Total

y Price Cost TFC TVC Revenue MC MR ATC AVC
0 200 250  250  0  0 **** **** **** ****
10 180 350  250  100  1450  100  1450  35  10
20 160 400  250  150  2800  50  1350  20  7.5
 15.3
30 140 460  250  210  3740  60  940 3  7
40 120 540  250  290  4260  80  520  13.1  7.25
50 100 650  250  400  4350  110  90  7  8
60 80 790  250  540  4010  140  -340  13.8  9
 10.2
70 60 970  250  720  3230  180  -780  5 9
 11.8
80 40 1200  250  950  2000  230  1230  15 8

8. Explain why government may choose to regulate instead of breaking up a natural

monopoly, then define and explain the socially-optimal price and the fair-return price.

It should be borne in mind that natural monopolies arise when a company can supply an
entire region with a service or product at a lower cost, so it is better for governments to
regulate them, since they can maximize their profits unlike companies not regulated.

9. Explain the purpose of antitrust laws and list each of the major laws.

What the antitrust law intends is to avoid monopolization, promote market competition and
be more efficient, however, the antitrust laws are: 1980 Law, Clayton Law of 1914, Federal
Commission Law of 1914, Celler-Kefauver Law 1950 and Sherman.

10. List the three types of mergers and explain each.

Horizontal mergers: These are companies that sell substitutable products in the same
geographical area or region.
Vertical mergers: They are the companies that have potential or real relationships between
the buyer and the seller
 Conglomerate mergers: Companies can share distribution or production channels or they
can be totally unrelated.
Congenital mergers: It is when two companies are in the same industry, but the relationship
of seller and customer is totally different.

11. Explain how the Herfindahl Index is calculated and how it is used as a guideline to the
government when approving horizontal mergers. Refer to Chapter 14, if needed.

The calculation is obtained by adding the squared percentage of market shares within the
industry, and the US government uses section 7 of the Clayton law to analyze horizontal
mergers.
12. Give one example of how the principles in this chapter currently impact your life or relate to
your chosen career.

These principles allowed me to understand many of the situations that occur in the region
where I live in Colombia, the cultivation and production of sugarcane is a monopoly, so it is
interesting to understand that governments regulate these industries and understand a little
their way of operating from the economy.