Managerial Economics 8th Edition

Samuelson Solutions Manual

Visit to download the full and correct content document: https://testbankdeal.com/dow
nload/managerial-economics-8th-edition-samuelson-solutions-manual/
 CHAPTER EIGHT

MONOPOLY

OBJECTIVES

1. To examine price and output decisions under pure monopoly.

(Pure Monopoly)

2. To explore how monopolies are maintained through barriers to entry.

(Barriers to Entry)

3. To contrast competitive and monopolistic outcomes. (Perfect

Competition versus Pure Monopoly)

4. To analyze cartel behavior. (Cartels)

5. To discuss natural monopoly and regulation. (Natural Monopolies)

6. To present a model of monopolistic competition. (Monopolistic

Competition)

TEACHING SUGGESTIONS

I. Introduction and Motivation

Market structure is studied in Chapters 7, 8, 9 and 10. The present chapter

focuses on monopoly and monopolistic competition – a natural contrast to
the analysis of perfect competition in Chapter 7. In turn, Chapter 9 considers
oligopoly.
Through the comparison of competition and monopoly, it should
become apparent that market structure is very important to decision making
and profitability. This is one reason that we see expensive and protracted
patent battles, why trademarks are so earnestly protected, and why so much
advertising money is spent to establish brand loyalty. Thus any managerial

John Wiley & Sons

8-1
decision must consider current market structure and how market structure is
evolving or likely to evolve.

II. Teaching the "Nuts and Bolts"

We begin by discussing with the students their notions of competition and

monopoly. In particular, we discuss the consequences of raising price.
Students will often declare that "a monopolist can increase price as high as
he or she wants and the consumer has no choice." Again, this can lead to a
nice discussion about demand and elasticity, substitute goods, etc. You may
want to refer back to the discussion of elasticity in Chapter 3.
In studying pure monopoly we like to begin by examining the
optimization process (again, it is identical to that studied in Chapter 2) and
also the determinants of profitability. Then we turn our attention to the many
types of barriers to entry. It is helpful to get students to discuss these barriers
and whether some may be socially useful (patents, scale economies, etc.)
and which may be socially harmful (strategic barriers, control of resources,
etc.) Note that there is a brief discussion of antitrust policy in Chapter 11. If
you are not assigning Chapter 11 later in the course you may want to assign
this short section now.
The comparison of perfect competition and monopoly focuses on
price and quantity effects. Again, social welfare implications are deferred to
Chapter 11. However, if Chapter 11 is not assigned in the course then you
might want to discuss the social welfare implications at this point. Cartels
offer dramatic examples of the difference between competitive behavior and
monopolistic behavior (achieved via cooperation). The regulation of natural
monopoly provides a second contrast between monopolistic behavior and
competitive behavior.
Finally, a discussion of monopolistic competition is provided. We
emphasize that this structure combines the monopolistic assumption of a
downward sloping demand curve, that is, differentiated products and some
product loyalty, with the competitive assumption of free exit and entry.

Mini-cases: Monopolies, Past and Present and Gasoline Price Gauging.

John Wiley & Sons

8-2
 Monopolies, Past and Present

For many managers, acquiring a monopoly position in a market is akin to

an all-consuming search for the Holy Grail. However, it is worth
remembering how few and far between monopolies are in the American
marketplace. The adage “Many are called, but few are chosen” certainly
applies to the monopoly quest. Here are three examples of “once, but not
necessarily future” monopolies.
The Xerox Corporation accounted for over 95 percent of photocopier
sales in the United States − a classic monopoly − until the late 1960s. In
the 1970s, Xerox’s U.S. market share fell sharply. New firms, such as
Canon, Sharp, Royal, and Savin successfully entered the copier market,
particularly in the low- and medium-price segments. Currently, these four
firms and Xerox make up this market with roughly comparable market
shares. In the high-price, high-volume, copier-duplicator segment, Xerox,
IBM, and Eastman Kodak divide the market (again roughly equally).
How did Xerox lose its monopoly position? During the 1970s, many of
the company’s original patents expired, making it much easier for firms to
market similar copiers. In 1975, Xerox was forced to sign a consent decree
with the Federal Trade Commission agreeing to license its copier patents to
other manufacturers. Perhaps more important, competitors were able to
innovate around Xerox’s patents and develop comparable or superior
copiers. In the early 1970s, Xerox stumbled by introducing a line of
medium-volume copiers that proved unreliable. Finally, when the market
moved from copier rental to copier purchase, new entry was facilitated
because far less financial muscle was needed to sell copiers than to
maintain a rental base.
Today, Xerox offers the widest product line and competes in more parts
of the world than any other copier manufacturer. However, copiers have
become much more of a “commodity” business, where numerous
companies produce comparable copiers and where efficient assembly is as
important as technological innovation. Instead of being a monopolist,
Xerox is merely one of a dozen major players in the world copier industry.

John Wiley & Sons

8-3
 The American Medical Association (AMA) has the responsibility for
overseeing the practice of medicine in the United States. Among its other
activities, the AMA establishes procedures for licensing physicians and
implementing guidelines for medical schools. In this latter role, the AMA
has exercised control over the number of medical schools and the number
of medical students in the United States. Prior to 1965, the AMA
influenced the number of doctors practicing in the United States by
limiting the number of medical students and imposing formidable
restrictions on the domestic practice of foreign-educated physicians. One
result of this limitation was elevated incomes for physicians. In the 1960s,
doctors’ earnings put them in the upper 20 percent of the income
distribution.
Since the 1980s, the AMA’s control of the number of medical students
has diminished and immigration laws for foreign doctors have been
loosened, resulting in a greater-than-40-percent increase in the supply of
doctors. By one estimate, this supply increase has “cost” the average
doctor 20 to 25 percent in annual income.2 In short, the erosion of the
AMA’s monopoly restrictions on the supply of physicians has meant a
reduction in the excess returns earned by the medical profession.
The National Collegiate Athletic Association (NCAA) establishes and
enforces the myriad rules governing intercollegiate athletics. Though
intercollegiate athletics are certainly a part of the college experience and
education, they are also “big business,” returning hundreds of thousands of
dollars to universities with the most successful programs. Some top college
coaches make seven-figure salaries. Athletic shoe companies pay top
teams to wear their products. By its authority, the NCAA has monopoly
control over this business. The organization determines the size and
number of scholarships in different sports and the number of games
played. It negotiates most of the lucrative radio and television agreements
for major collegiate sports, such as football and basketball. Most
important, the NCAA limits the “salaries” paid to athletes to the cost of
tuition plus room and board. Of course, the NCAA and university
presidents argue strenuously that student athletes should not be paid.
Whether one agrees with this view or not, a basic fact remains. The
enormous profitability of intercollegiate sports is a direct result of the
NCAA’s “monopoly-like” behavior − in particular, output restrictions that
keep revenues high and scholarship rules that keep costs low.

John Wiley & Sons

8-4
 Gasoline Price Gauging

In 1981, a Boston-based gas station owner set the highest gasoline

prices in the nation.1 During that summer, he charged $1.69 per gallon
for unleaded gas during the daytime and $2.59 per gallon at night,
when other downtown gas stations were closed. (His all-time high
price was $3.99.) Even at these extreme prices, the station sold an
average of 3,000 gallons per week, half of this at night. Despite
catcalls, pickets, and even vandalism from angry motorists during the
gasoline crisis, the owner “stuck by his pumps”; he even charged $1
for air. As he put it, “People think of gas stations as public mammary
glands, but they’re wrong. This is a business and it’s important to
generate profits from every part of it. If I can use a resource, like air,
to pay for the electric bill, so much the better. If you allow capitalism
in its true form, it works beautifully.”
The station owner was an avowed profit maximizer, albeit not a
very attractive one. How did he profit by his dual-price policy? The
answer is price discrimination. Although his costs varied little day and
night, the elasticity of demand varied greatly. He maximized his profit
by charging a higher price at night, when demand is much more
inelastic than during the day. In fact, we could go so far as to say that
he operated under different market structures, day and night. At night,
he appeared to have a pure local monopoly. Motorists desperate for
gas had to drive miles to find another station open during those hours.
Thus, the owner sold gas even at gouging prices. (Of course, at those
prices the motorist may have preferred to buy five gallons rather than
a full tank.) During the day, he faced a number of competitors within
blocks and numerous stations in neighboring Cambridge. That is, the
market resembled monopolistic competition. There was some product
differentiation due to locational convenience and brand allegiance.
Nonetheless, in normal times excess profits are limited by relatively
free entry of new firms. (The gasoline crisis and accompanying supply
shortage afforded sellers short-run, excess profits.)
1 E. Keerdojan, “There’s No Oil Glut for a Price Glutton,” Newsweek (July 6, 1981), p.
14.

John Wiley & Sons

8-5
Question

a. Suppose that, during the day, the station owner’s demand is given by
PD = 2.06 - .00025QD. The marginal cost of selling gasoline is $1.31
per gallon. At his current $1.69 price, he sells 1,500 gallons per
week. Is this price-output combination optimal? Explain.

b. The station owner sells an equal number of gallons at night, setting

PN = $2.59. Suppose elasticity of demand is E P = -3. According to
the optimal markup rule (in Chapter 3), is this price profit
maximizing?

c. The station owner is able to sell gasoline day and night at high
prices. Why aren’t there more gas stations in downtown locations in
major cities? Explain.

Answer

a. The combination, QD = 1,500 gallons and PD = $1.69, is profit

maximizing. This quantity satisfies MR = MC: 2.06 - (.0005)(1,500)
= 1.31.

b. The $2.59 price at night is not optimal. According to the markup rule,
the price should be: P = [-3/(1 - 3)]1.31 = $1.96 1/2.

c. Although his contribution margin is very high, this does not mean
that he is enjoying large profits. The high, fixed cost of downtown
real estate is the main factor limiting his profit. This factor explains
why one finds skyscrapers, not gas stations, in the downtown sections
of major cities.

John Wiley & Sons

8-6
 ADDITIONAL MATERIALS

I. Short Readings

N. Irwin, Uber’s Real Challenge: Leveraging the Network Effect,” The New
York Times, June 16, 2014, p. B8.

P. Krugman, “The Decline of E-Empires,” The New York Times, August 26,
2013, p. A14.

N. Bilton, “Disruptions: Ride-Sharing Upstarts Challenge Taxi Industry,”

The New York Times, July 22, 2013, p. B4.

S. Reed, “OPEC, Foreseeing no Glut, Keeps Oil Production Level Steady,”

The New York Times, December 5, 2013, p. B3.

A. Frangos and H. Tan, “Cartel Pushes up Price of Rubber,” The Wall Street
Journal, August 20, 2012, p. C4.

J. D. Rockoff, “Goodbye, Lipitor. Pfizer Bids a Farewell,” The Wall Street

Journal, May 10, 2012, pp. B1, B2.

D. Brooks, “The Creative Monopoly,” The New York Times, April 24, 2012,
p. A21.

P. Loftus, “Forget Generics, Pfizer Has Plenty of Lipitor for You,” The Wall
Street Journal, November 2, 2011, p. B1.

T. Wu,” In the Grip of the New Monopolists,” The Wall Street Journal,
November 19, 2010, p. A23.

J. B. Stewart, “Few Match Google; Does that Make it a Monopoly?” The

Wall Street Journal, May 6, 2009, p. D2.

R. L. Rundle, “Botox Faces Worry Lines in Smooth Skin Game,” The Wall
Street Journal, December 6, 2007, p. B1.

J. Carreyrou, “Inside Abbott’s Tactics to Protect AIDS Drug,” The Wall

John Wiley & Sons

8-7
Street Journal, January 3, 2007, pp. A1, A10.

“The Garbage Wars: Cracking the Cartel” The New York Times, July 30,
1996, p. 1.

II. Longer Readings

L. M. Kahn, “Cartel Behavior and Amateurism in College Sports,” Journal of

Economic Perspectives, Vol. 21, Winter 2007, 209-226.

J. M. Perloff, “Cartels,” Journal of Industrial Organization Education, Vol. 1,

2006.

III. Cases

Forever: De Beers and U.S. Antitrust Law, Harvard Business School,

(9-700-082), 2000. Teaching Note (5-701-019)

IV. Quips and Quotes

Where does the monopolist gorilla sleep? Anywhere it wants.

United cartels stand, divided they fall.

There is no good solution for technical monopoly. There is only a choice

among three evils: private unregulated monopoly, private monopoly
regulated by the state, and government operation. (Milton Friedman)

The best of all monopoly profits is the quiet life. (J. R. Hicks)

Like many businessmen of genius he learned that free competition was

wasteful, monopoly efficient. (Mario Puzo, in The Godfather)

Monopoly . . . is a great enemy to good management. (Adam Smith)

John Wiley & Sons

8-8
 Answers to Back-of-the-Chapter Problems

1. a. The merger should mean the end of the prevailing cutthroat competition.
The merged firm should set out to achieve the available monopoly
profit.

b. Formerly, cutting rates made sense in order to claim additional clients

from one’s rival. After the merger, the newspapers will raise rates
(again seeking the monopoly level).

2. If the company is currently charging the optimal monopoly price, any

cut will reduce its profit – the larger the price cut, the larger the profit
reduction. Here is an illustration of how to compute the profit impact
of a 20 percent price cut. Suppose the company’s current price and
output are P = $.20/pill and Q = 1 million pills and that MC = $.10/pill.
Then, the company’s current contribution is: (.20 - .10)(1) = $.1
million.
Suppose the company lowers price to P = $.16 and the elasticity of
demand turns out to be EP = -1.5. Then dQ/Q = (-1.5)(-20%) = 30%, so
Q = 1.3 million. The firm’s new contribution is: (.16 - .10)(1.3) = $.078
million, implying a 22% fall in profit.

3. Packing the product space with a proliferation of differentiated items is

a classic example of strategic entry deterrence. The slower selling
brands are not profitable in themselves. However, they raise the firms’
overall profits by leaving no product niche for a new rival to profitably
enter the market.

John Wiley & Sons

8-9
4. a. A profit-maximizing cartel sets MR = MC. Thus, 500 - (2/3)Q = 200,
or QM = 450 thousand trips. In turn, PM = 500 - 450/3 = $350 per trip.

b. Under perfect competition, PC = LAC = $200. Thus, QC = 900 thousand

trips.

5. a. We know that P = 11 - Q and C = 16 + Q. Setting MR = MC, we have

11 - 2Q = 1. Thus, the monopolist sets QM = 5 million and PM = $6.

b. The regulator sets P = AC. Thus, 11 – Q = 16/Q + 1. After multiplying

both sides by Q, this becomes a quadratic equation with two roots: Q =
2 and Q = 8. Naturally, the regulator selects the larger output level, so
we have QR = 8 million and PR = $3.

c. Under marginal-cost pricing, P* = MC = $1 and Q = 11 – P = 10

million. At this quantity, AC is 26/10 = $2.60. The shortfall of price
below average cost is 2.60 – 1 = $1.60 per unit.

6. a. The monopolist sets MR = MC, implying 1,500 - .2Q = 300 + .1Q, or

QM = 4,000 tons. In turn, PM = 1,500 - (.1)(4,000) = $1,100.

b. Total profit is 4,400,000 - [1,400,000 + 1,200,000 + 800,000] =

$1,000,000.

7. a. OPEC maximizes its profit by setting MR = MC. We have 165 - 5Q =

15. Therefore, Q* = 30 thousand barrels per day. In turn, P* = $90 per
barrel.

b. If OPEC sets P = $65, it sells: Q = 66 – (.4)(65) = 40 million barrels

per day. Profit (per day) is: π = (65 - 15)(40) = $2.0 billion. Instead, if
it sets P1 = $90 for the first five years, its initial profit is: π1 = (90 -

John Wiley & Sons

8-10
 15)(30) = $2.25 billion per day. In the second 5-year period, its optimal
quantity and price are: Q2 = 24 million barrels per day and P2 = $75.
(Check this by using the long-run demand curve and setting MR =
MC.) Thus, its profit is: π2 = (75 - 15)(24) = $1.44 billion per day.
OPEC’s average profit over the decade (ignoring discounting) is
$1.845 billion per day – lower than the $2 billion per day achieved if it
holds its price to $65.

8. a. We have P = 35 - 5Q and MC = AC = 5. Setting MR = MC, we find

QM = 3 million chips and PM = $20.

b. The monopolist’s profit is: πM = (20 - 5)(3) = $45 million. Consumer

surplus is: (.5)(35 - 20)(3) = $22.5 million.

9. a. At P = $15, 2.5 million trips are demanded. In the text, we saw that
each fully utilized taxi had an average cost per trip of $10 and,
therefore, earned an excess profit of (15 - 10)(140) = $700 per week.
The commission should set the license fee at L = $700 to tax away all
this excess profit. Assuming that 14,286 taxis operate (just enough to
meet the 2.5 million trips demanded), the commission collects a total
of $12.5 million in license fees.

b. The rearranged demand curve is P = 20 - 2Q. We saw that the extra

cost of adding a fully occupied taxi is $1,400 per week, or $10 per trip.
The relevant MC per trip is $10. Setting MR = MC, we have 20 - 4Q =
10. Thus, QM = 2.5 million trips and PM = $15. The current, regulated
fare happens to be profit maximizing ($12.5 million in profit per week)
for the industry.

c. If the market could be transformed into a perfectly competitive one, the

result would be PC = ACMIN = $10, QC = 10 - (.5)(10) = 5 million trips,
and the number of taxis is 35,714.

John Wiley & Sons

8-11
 d. Taxi trips are not perfect substitutes. If a taxi charges a fare slightly
higher than the industry norm, it will not lose all its sales. (Customers
in need of a taxi will take the one in hand, rather than wait for a
slightly cheaper fare.) Since there is room for product differentiation
and price differences, the taxi market probably is best described as
monopolistic competition. In this setting, all cabs make zero profit (due
to free entry). If price settles at P = $12.80, then AC = $12.80 for each
cab. This AC occurs at 100 trips per week; each taxi is 71 percent
utilized. Trip demand is: Q = 10 – (.5)(12.80) = 3.6 million trips
serviced by 36,000 taxis (each making 100 trips).

10. a. To produce a fixed amount of output (in this case, 18 units) at

minimum total cost, the firms should set outputs such that MC A =
MCB. This implies 6 + 2QA = 18 + QB, or QB = 2QA - 12. Using this
equation together with QA + QB = 18, we find QA = 10 and QB = 8. The
common value of marginal cost is 26.

b. We know that P = 86 - Q, implying MR = 86 - 2Q. Marginal revenue

at Q = 18 is 86 - (2)(18) = 50. This exceeds either firm’s marginal cost
(26); therefore, the cartel can profit by expanding output.

c. Setting MR = MCA = MCB implies 86 - 2(QA + QB) = 6 + 2QA = 18 +

QB. The solution is QA = 13 and QB = 14. The cartel price is P = $59,
and the common value of MR and the MCs is 32.

11. a. The bookstore’s profit is:  = (P – AC)Q = (9 – 5)(12) = $48 thousand.

Consumer surplus = ½(15 – 9)(12) = $36 thousand.

b. From the demand curve, the chain sells 6 thousand books online at P =
$12 and 10 thousand books in its stores at P = $7. Therefore, its total
profit is (12 – 4)(6) + (7 – 5)(10) = $68 thousand. Consumer surplus is
the sum of triangles A and B: CS = ½(15 – 12)(6) + ½(12 – 7)(10) =
$34 thousand (less than in part a). From the consumer’s standpoint,
online selling has twin countervailing effects. In-store buyers benefit

John Wiley & Sons

8-12
 from lower prices brought by online competition. Online buyers pay a
higher price than before (due to the chain’s skillful price
discrimination).

Price
15
A
12

9 B
7
P = 15 - .5Q

6 12 16 Quantity

*12. a. We know that P = 660 - 16Q1 and C = 900 + 60Q1 + 9Q12. Setting MR
= MC, we have: 660 - 32Q1 = 60 + 18Q1 or Q1 = 12. In turn, P1 = $468.
The firm’s profit is: π = R – C =
(468)(12) - [900 + (60)(12) + 9(12)2] = 5,616 - 2,916 = $2,700.

b. If 10 firms each produce 6 units, total output is 60 and the market price
is indeed P = 1,224 - (16)(60) = $264. Setting firm 1’s MR = MC
yields 1,224 - (16)(54) - 32Q1 = 60 + 18Q1, implying Q1 = 6 units as
claimed. Finally, the firm’s average cost is: C/Q = [900 + (60)(6) +
9(6)2]/6 = $264. With P = AC, the typical firm earns a zero economic
profit.

c. Under perfect competition, Pc = ACMIN. Setting AC = MC, we have:

900/QF + 60 + 9QF = 60 + 18QF, implying QF = 10 and ACmin = 240.
Thus, Pc = $240 and Qc = 76.5 - (240)/16 = 61.5. The number of firms
is found by dividing total output by each firm’s output: 61.5/10 = 6.15
firms.

John Wiley & Sons

8-13
Discussion Question

Under patent, the pharmaceutical company has a monopoly on the drug in

question. The firm must still gauge overall demand in order to determine the
profit-maximizing monopoly price. Upon the expiration of the patent, there
is virtually free entry into the market, and numerous firms begin to produce
generic versions of the drug. If the generic versions are seen as perfect
substitutes for the monopoly drug, then vigorous price cutting would lead to
the perfectly competitive outcome.
More likely, the former monopoly producer will have established some
degree of brand allegiance for its drug. Because of new competition, it will
be forced to lower its prices, but not all the way to the perfectly competitive
level. (In addition to its branded version, the former monopolist might also
choose to market its own generic version at a discount price to compete with
rival generic versions.)
Figure 8.3 can be used to highlight the different pricing implications of
pure monopoly and perfect competition. (However, Figure 8.3 depicts
constant returns at the industry level, whereas the cost structure for
pharmaceuticals exhibits significant sunk costs with AC steeply falling as
output increases).

Spreadsheet Problems

S1. a. and b. Using the spreadsheet optimizer, we find the monopolist’s

optimal plan in the short run: Maximize total profit in cell F8 by
changing the typical plant’s level of output (Q F) in cell B14. The
result is: QF = 4 and  = $450. Note that MR = MC at this optimal
solution.

c. To maximize the monopolist’s long-run profit, we include the

number of plants in cell C8 as a variable cell. The new solution is:
QF = 5, # firms = 20, and  = $500.

John Wiley & Sons

8-14
S2. Use the spreadsheet created for Problem S2 of Chapter Seven. The
monopolist’s objective is to maximize profit (cell F12) by changing
the level of output in cell C5. The monopolist’s optimal output is
QM = 24 and its maximum profit is $1,340.

S3. a. and b. Using the spreadsheet optimizer, we determine the short-run

equilibrium under monopolistic competition as follows: Set the
value of MR – MC in target cell G14 equal to zero by changing QF
in cell B14. The resulting equilibrium is: QF = 8.95.

c. To find the long-run equilibrium, set the value of MR – MC in target

cell G14 equal to zero by changing QF in cell B14 and #firms in cell
D8, subject to total profit in cell G8 being equal to zero. The
equilibrium is: QF = 6, # firms = 10, and P = AC = $264.

John Wiley & Sons

8-15
Another random document with
no related content on Scribd:
OR IMPLIED, INCLUDING BUT NOT LIMITED TO
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
ANY PURPOSE.

1.F.5. Some states do not allow disclaimers of certain implied

warranties or the exclusion or limitation of certain types of
damages. If any disclaimer or limitation set forth in this
agreement violates the law of the state applicable to this
agreement, the agreement shall be interpreted to make the
maximum disclaimer or limitation permitted by the applicable
state law. The invalidity or unenforceability of any provision of
this agreement shall not void the remaining provisions.

1.F.6. INDEMNITY - You agree to indemnify and hold the

Foundation, the trademark owner, any agent or employee of the
Foundation, anyone providing copies of Project Gutenberg™
electronic works in accordance with this agreement, and any
volunteers associated with the production, promotion and
distribution of Project Gutenberg™ electronic works, harmless
from all liability, costs and expenses, including legal fees, that
arise directly or indirectly from any of the following which you do
or cause to occur: (a) distribution of this or any Project
Gutenberg™ work, (b) alteration, modification, or additions or
deletions to any Project Gutenberg™ work, and (c) any Defect
you cause.

Section 2. Information about the Mission of

Project Gutenberg™
Project Gutenberg™ is synonymous with the free distribution of
electronic works in formats readable by the widest variety of
computers including obsolete, old, middle-aged and new
computers. It exists because of the efforts of hundreds of
volunteers and donations from people in all walks of life.

Volunteers and financial support to provide volunteers with the

assistance they need are critical to reaching Project
Gutenberg™’s goals and ensuring that the Project Gutenberg™
collection will remain freely available for generations to come. In
2001, the Project Gutenberg Literary Archive Foundation was
created to provide a secure and permanent future for Project
Gutenberg™ and future generations. To learn more about the
Project Gutenberg Literary Archive Foundation and how your
efforts and donations can help, see Sections 3 and 4 and the
Foundation information page at www.gutenberg.org.

Section 3. Information about the Project

Gutenberg Literary Archive Foundation
The Project Gutenberg Literary Archive Foundation is a non-
profit 501(c)(3) educational corporation organized under the
laws of the state of Mississippi and granted tax exempt status by
the Internal Revenue Service. The Foundation’s EIN or federal
tax identification number is 64-6221541. Contributions to the
Project Gutenberg Literary Archive Foundation are tax
deductible to the full extent permitted by U.S. federal laws and
your state’s laws.

The Foundation’s business office is located at 809 North 1500

West, Salt Lake City, UT 84116, (801) 596-1887. Email contact
links and up to date contact information can be found at the
Foundation’s website and official page at
www.gutenberg.org/contact

Section 4. Information about Donations to

the Project Gutenberg Literary Archive
Foundation
Project Gutenberg™ depends upon and cannot survive without
widespread public support and donations to carry out its mission
of increasing the number of public domain and licensed works
that can be freely distributed in machine-readable form
accessible by the widest array of equipment including outdated
equipment. Many small donations ($1 to $5,000) are particularly
important to maintaining tax exempt status with the IRS.

The Foundation is committed to complying with the laws

regulating charities and charitable donations in all 50 states of
the United States. Compliance requirements are not uniform
and it takes a considerable effort, much paperwork and many
fees to meet and keep up with these requirements. We do not
solicit donations in locations where we have not received written
confirmation of compliance. To SEND DONATIONS or
determine the status of compliance for any particular state visit
www.gutenberg.org/donate.

While we cannot and do not solicit contributions from states

where we have not met the solicitation requirements, we know
of no prohibition against accepting unsolicited donations from
donors in such states who approach us with offers to donate.

International donations are gratefully accepted, but we cannot

make any statements concerning tax treatment of donations
received from outside the United States. U.S. laws alone swamp
our small staff.

Please check the Project Gutenberg web pages for current

donation methods and addresses. Donations are accepted in a
number of other ways including checks, online payments and
credit card donations. To donate, please visit:
www.gutenberg.org/donate.

Section 5. General Information About Project

Gutenberg™ electronic works
Professor Michael S. Hart was the originator of the Project
Gutenberg™ concept of a library of electronic works that could
be freely shared with anyone. For forty years, he produced and
distributed Project Gutenberg™ eBooks with only a loose
network of volunteer support.

Project Gutenberg™ eBooks are often created from several

printed editions, all of which are confirmed as not protected by
copyright in the U.S. unless a copyright notice is included. Thus,
we do not necessarily keep eBooks in compliance with any
particular paper edition.

Most people start at our website which has the main PG search
facility: www.gutenberg.org.

This website includes information about Project Gutenberg™,

including how to make donations to the Project Gutenberg
Literary Archive Foundation, how to help produce our new
eBooks, and how to subscribe to our email newsletter to hear
about new eBooks.