11. Government encouragement of monopoly: a. usually leads to lower prices and h

Question

11. Government encouragement of monopoly: a. usually leads to lower prices and higher consumer surplus b. through patents causes higher consumer prices but encourages firms to innovate and bring new products to the market reduces the market power of regulated firms results in the regulated firm producing beyond the competitive output level c. d. 12. In market A, a firm with market power faces an inverse demand curve of P 10- and a marginal cost that is constant at $2. In market B, a firm with market power faces arn inverse demand curve of P 8-0.750 and a marginal cost of $2. Producer surplus in market A is than in market B I lower b. $2 lower c. $4 higher d. $8 higher 13. In a market served by a monopoly, the marginal cost is $60 and the price is $110. In a perfectly competitive market, the marginal cost is $60. If the marginal cost increased from $60 to $75, the monopoly would raise its price competitive market would and the price in the perfectly a. by $75; increase to $75 b. to $115; remain unchanged at $60 c. by $15; increase by $15 d. by less than $15; increase to $75 14. Suppose that the demand for bentonite is given by -40 0.5P, where Q is in tons of bentonite per day and P is the price per ton. Bentonite is produced by a monopolist at a constant marginal and average total cost of $10 per ton. How much profit is earned per day if the profit-maximizing quantity of bentonite is sold at the profit-maximizing price? a. $175 b. $600 c. $787.50 d. $612.50 15. In Louisiana, it was a crime to sell burial caskets without a funeral director's license. This law was a source of for licensed funeral directors and an example of a. market power; a government-sanctioned barrier to entry b. market power; a natural monopoly c. product differentiation; scale economies d. scale economies; a natural monopoly

Explanation / Answer

11. The right answer is option b.

Explanation: When the government encourages monopoly through granting a patent, it wants to provide an incentive to the firm for its R&D and other efforts. These types of economic incentives can fuel innovation. However, the consumers have to pay a higher price because the monopoly firm charges a higher price.

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