Answered: If an industry has a high barriers to…

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter15: Monopoly

Section: Chapter Questions

Problem 7PA

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1. If an industry has a high barriers to entry, then: A. Abnormally high profits will attract the entry to new firms. B. The entry to new firms will eventually cause price to decline. C. Surviving firms earn only a normal level of profit in the long run. D. Entry will be blocked even if firms are earning high profits. 2. If the government determines that a natural monopoly must set a price equal to its average cost plus 10%, this is an example of: A. Cost-plus regulation B. Price cap regulation C. Restrictive prices D. Antitrust law 3. The government should not apply antitrust laws to natural monopoly because: A. doing so would raise costs B. natural monopolies are too technical and complex for antitrust laws C. the new firms formed by antitrust action would immediately merge into a new natural monopoly D. none of the above; the government should use antitrust law against natural monopolies

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