Each of the following practices violates U.S. antitrust law except ________.

A. an agreement to sell one good only if the buyer purchases another good

B. an agreement between the manufacturer and the seller to charge a given price for the good

C. starting a price war with other sellers of a similar good

D. cutting the price to increase market share to 100 percent, then raising the price

The oligopoly dilemma is whether to ________.

A. act together to restrict output and raise the price

B. raise the price to the monopoly profit-maximizing price

C. cheat on others in the cartel to take advantage of profit opportunities

D. lower the price to the perfectly competitive price

If firms in oligopoly form a cartel, it will likely break down because ________.

A. firms cannot agree on how to share the economic profit

B. the price set by the cartel is too low

C. with price exceeding marginal cost, a firm might expand production to increase its profit

D. firms realize that their allocation of resources is inefficient

The four largest firms in a market have the following market shares of total revenue: 20 percent, 15 percent, 10 percent, and 5 percent. The ________ in this industry is ________.

A. four­firm concentration ratio; 50 percent

B. four­firm concentration ratio; 750 percent

C. Herfindahl­Hirschman Index; 50

D. Herfindahl­Hirschman Index; 2,500

A firm in monopolistic competition maximizes its profit by ________.

A. differentiating its good and producing the quantity at which price equals marginal revenue

B. producing the quantity at which marginal revenue equals marginal cost and then adding a markup

C. raising its price and producing so that it always has excess capacity

D. producing the quantity at which marginal cost equals marginal revenue and charging the highest price at which it can sell that quantity

The four largest firms in a market have the following market shares of total revenue: 20 percent, 15 percent, 10 percent, and 5 percent. The ________ in this industry is ________. A. four-firm concentration ratio; 50 percent B. four-firm concentration ratio; 750 percent C. Herfindahl-Hirschman Index; 50 D. Herfindahl-Hirschman Index; 2,500

Explain why the economic profit that Babolat and Sony make in this market is likely to be temporary. Draw a graph to illustrate the outcome in the long run. Show the excess capacity and markup in the long run.

Read Eye on Smartphones on p. 451 and explain why smartphone producers offer such a large variety of their products. Draw a graph of a firm’s cost and revenue curves if all smartphones are identical. Use your graph to illustrate the effects of the firm introducing a new, differentiated smartphone.

Bobbie’s Hair Care is a natural monopoly. Table 1 shows the demand schedule (the first two columns) and Bobbie’s marginal cost schedule (the middle and third columns). Bobbie has done a survey and discovered that she has four types of customers each hour: one woman who is willing to pay $18, one senior who is willing to pay$16, one student who is willing to pay $14, and one boy who is willing to pay$12. Suppose that Bobbie’s fixed costs are $20 an hour and Bobbie’s price discriminates.

Who benefits from Bobbie’s price discrimination? Is the quantity of haircuts efficient?

Governments regulate natural monopoly by capping the price at ________. A. marginal revenue and allowing the monopoly to maximize profit B. marginal cost so that the monopoly is efficient and makes zero economic profit C. average total cost, which allows the monopoly to be inefficient but make zero economic profit D. the buyers’ willingness to pay, which makes the monopoly operate efficiently

Governments regulate natural monopoly by capping the price at ________.

A. marginal revenue and allowing the monopoly to maximize profit

B. marginal cost so that the monopoly is efficient and makes zero economic profit

C. average total cost, which allows the monopoly to be inefficient but make zero economic profit

D. the buyers’ willingness to pay, which makes the monopoly operate efficiently

A monopoly that price discriminates ________.

A. benefits buyers because it offers the good at a variety of prices

B. gains because it converts consumer surplus to economic profit

C. uses resources more efficiently than would a competitive market

D. enables buyers to maximize their consumer surplus

A monopoly that price discriminates ________. A. benefits buyers because it offers the good at a variety of prices B. gains because it converts consumer surplus to economic profit C. uses resources more efficiently than would a competitive market D. enables buyers to maximize their consumer surplus

A single-price monopoly is ________.

A. inefficient because it converts consumer surplus to producer surplus

B. inefficient because it produces too small an output and creates a deadweight loss

C. efficient because buyers are paying a price equal to their willingness to pay

D. efficient because it is the only producer of the good