MONOPOLY society\'s perspective, assuming economies of scale are not substantial

Question

MONOPOLY society's perspective, assuming economies of scale are not substantial: 1· From monopoly markets are more efficient than competitive markets. b it is never good to have only one firm service an entire market. a. com petition leads to lower prices, higher output, and greater efficiency than monopoly if the firm is a natural monopoly d. competition leads to lower prices, higher output, and greater efficiency than monopoly provided the firm is not a natural monopoly Government addresses the inefficiency associated with monopoly by: 2. , restricting market power through antitrust laws and regulation. b. prohibiting all forms of market power. crequiring all firms to seek government approval before raising prices. d. preventing all proposed mergers. 3. The Justice Department reviews proposed mergers to ensure that the resulting firm is able to earn a positive economic profit. reviews proposed mergers to determine if the merger would create excessive market a. b. c. does not interfere with business mergers because the U.S. economy is based on d. does not interfere with business mergers because that is the primary function of the power. private property and free markets. Federal Trade Commission. The Sherman Act of 1890: a. b. c. d. 4. was passed to prevent false and deceptive advertising. established the Federal Trade Commission to deal with unfair business practices. declared monopoly and unreasonable trade restraints illegal. specified the conditions under which mergers would be considered anti- competitive. When government sets price equal to average total cost for a natural monopoly: a. the firm will experience losses. b. economic profit is equal to zero. c. price will also be equal to marginal cost. d. the outcome is e fficient since marginal benefit equals marginal cost. Assuming government regulators are forcing a monopoly seller to charge a price equal to marginal cost: economic profit will be equal to zero but production will be inefficient. economic profit will be greater than zero and production will be inefficient. a. the output level will be efficient but economic profit might be negative. d. the output level will be inefficient but econo mic profit will be zero.

Explanation / Answer

1.
d. competition leads to lower prices, higher output, and greater efficiency than monopoly provided the firm is not a natural monopoly.
A competitive economy is more efficient than a monopoly but if a monopoly is natural then it will economies of scale which make it more efficient than a new entrant.

2.
a. restricting market power through antitrust laws and regulation.
The government introduced many Antitrust laws and regulations such as the Sherman Act of 1890 and the Clayton Act of 1914 and much more for regulating unfair business practices.

3.
The Justice Department reviews proposed mergers to determine if the merger would create excessive market power.
The Justice Department in view of the Sherman Act of 1890 reviews all cases of mergers which would create too much concentration of market power in the hands of few people.

4.
The Sherman Act of 1890
d. specified the conditions under which mergers would be considered anti-competitive.
The Sherman Act of 1890 was a first major legislation against business activities in nature of unfair practices and cartels, this act was further strengthened by the Clayton Act of 1914.

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