What is the patent system intended to do? reward innovators by granting them temporary monopolies give small businesses a competitive edge over larger businesses spread information among firms as quickly and economically as possible prevent natural monopolies from unfairly exploiting their cost advantages

What is the patent system intended to do? reward innovators by granting them temporary monopolies give small businesses a competitive edge over larger businesses spread information among firms as quickly and economically as possible prevent natural monopolies from unfairly exploiting their cost advantages

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter9: Monopoly

Section: Chapter Questions

Problem 28CTQ: Intellectual property laws are intended to promote innovation, but some economists, such as Milton...

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If Congress reduced the period of patent protection from 20 years to 10 years, what would likely happen to the amount of private research and development?
Intellectual property laws are intended to promote innovation, but some economists, such as Milton Friedman, have argued that such laws are not desirable. In the United States, there is no intellectual property protection for food recipes or for fashion designs. Considering the state of these two industries, and hearing in mind the discussion of the inefficiency of monopolies, can you think of any reasons why intellectual property laws might hinder innovation in some cases?
If the transit system were allowed to operate as an unregulated monopoly, what output would it supply and what price would it charge?
If a monopoly firm is earning profits, how much would you expect these profits to be diminished by entry in the long run?
ALCOA does not have the monopoly power it once had. How do you suppose their barriers to entry were weakened?
Draw the demand curve, marginal revenue, and marginal cost curves from Figure 9.6, and identify the quantity of output the monopoly wishes to supply and the price it will charge. Suppose demand for the monopolys product increases dramatically. Draw the new demand me. What happens to the marginal revenue as a result of the increase in demand? What happens to the marginal cost curve? Identify the new profit-maximizing quantity and price. Does the answer make sense to you? Figure 9.6 Illustrating Profits at the HealthPill Monolpoly
Do you think it is possible for government to outlaw everything that businesses could do wrong? If so, why does government not do that? If not, how can regulation stay ahead of rogue businesses that push the limits of the system until it breaks?
part D E urgently need I. Two firms, Tac-Burger Ltd. and Back-rib-Burger Ltd., use the same technology to produce output that is given by: Q = 600(F1/2 + M1/3) K where F = Female worker; M = Male worker; K = capital With the price of good (P) set at $1, Tac-Burger pays female an hourly wage WF and male a wage WM. The price of capital (r) is $1 and the quantity of capital is fixed at 1. Back-rib-Burger pays a wage W to both male and female. a. The Press went after Tac-Burger accusing the company of gender discrimination. The CEO replied that their company was in the business to make money and their remuneration policy is consistent with the basic theory of profit maximization taught in basic principles of economics and managerial economics. What convincing argument must be put forward by the press to show that Tac-Burger indeed practices gender discrimination? What proof should the CEO provide to convince the public that the wage practice is fair? b.…
Acme Drug Co. has a patent on the drug A-rene, the annual demand for which can be described by the demand curve: Q = 4500 - 300P. Production of the drug requires an annual fixed cost of $3,000 and a per unit marginal cost of $5. (i) How many units of the drug will Acme produce each year, and what price will it charge, in order to maximize its profits? What will be its annual profits? (ii) Now suppose that the Better Drug Co. has discovered B-rene, a new drug which seems to be identical to A-rene in all its effects. If Better enters the market, competition with Acme will conform to a Cournot duopoly. Better’s costs are identical to those of Acme. What would be the equilibrium outcome of this duopoly? Specifically, how much would each firm produce and what would be the price? How much profit would each firm make? Would Better find it profitable to enter the market? (iii) Would it be in the interests of society as a whole for Better Drug to enter into production? Identify the gainers and…
. Can we consider WAPDA a government-created/state monopoly? Was creatingWAPDA bad public policy? Explain.ii. Why is marginal revenue less than the price for monopolies? Can marginal revenueever be negative? Explain.iii. Show the deadweight loss from unregulated monopoly. Explain your answer as itrelates to WAPDA.iv. Describe in detail the Public Policy measures that the government can use to managegovernment-created/state monopolies like WAPDA.
Consider a natural monopoly with large fixed costs and a constant marginal cost of production, such as supplying water to household. Which condition can be used to regulate such a natural monopoly to ensure that the firm continues to operate while maximizing consumer surplus? Question 23Answer a. Demand = Average Cost b. Demand = Marginal Cost c. Marginal Cost = Marginal Revenue d. Price = Marginal Cost e. Price = Marginal Revenue
Different Methods of Monopoly Regulation Discuss the pros and cons of two monopoly regulation methods and evaluate their effectiveness. Which regulation methods is the most effective? Why? Which regulation method fits and exemplifies the two regulation theories? If you were charged with regulating a monopoly, how would yu do it? Take parts for each regulation method you discussed and explain why you think your method would be effective.