Question : 59) a.What the defining characteristic of a natural monopoly? b.Should the : 1244625

59)

a.What is the defining characteristic of a natural monopoly?

b.Should the government break up a natural monopoly into two or more firms to make the industry more competitive?

c.Suppose the government wants to ensure that some of the benefits of declining average total cost are passed on to consumers. To achieve this goal, it requires that the natural monopoly set its price equal to marginal cost. Is this a feasible goal? Explain.

d.What is an alternative to marginal cost pricing that ensures that consumers reap some of the benefits of declining average total cost?

60) Identify the type of merger in each of the following situations and indicate how the post-merger concentration ratio for the industry is affected.

a.A steel company merges with a coal and iron ore mining company.b.Staples, a retailer of office supplies, acquires Office Depot, another retailer of office supplies.c.              An oil company merges with pipeline, shipping, and railroad companies as well as refineries and gas stations.

61) Consider two industries, industry W and industry X. In industry W there are five companies, each with a market share of 20% of total sales. In industry X, there are six companies. One company has a 50% market share and each of the other five firms has a market share of 10%.

a.Calculate the four-firm concentration ratio for each industry.

b.Calculate the Herfindahl-Hirschman Index (HHI) for each industry.

c.What do the values of the two concentration measures imply about the degree of market power in the two industries?

Figure 10-17

62) Refer to Figure 10-17 to answer the following questions.

a.What quantity will this monopoly produce and what price will it charge?

b.Suppose the government decides to regulate this monopoly and imposes a price ceiling of $25. Now what quantity will the monopoly produce and what price will it charge?

c.Will every consumer who is willing to pay the ceiling price of $25 be able to buy the product? Briefly explain.

63) Consider two industries, industry Q and industry Z. In industry Q there are 10 companies, each with a market share of 10% of total sales. In industry Z, there are eight companies. One company has a 65% market share and each of the other seven firms has a market share of 5%.

a.Calculate the four-firm concentration ratio for each industry.

b.Calculate the Herfindahl-Hirschman Index (HHI) for each industry.

c.What do the values of the two concentration measures imply about the degree of market power in the two industries?

Figure 10-18

64) Refer to Figure 10-18 to answer the following questions.

a.What quantity will this monopoly produce and what price will it charge?

b.Suppose the monopoly is regulated. If the regulatory agency wants to achieve economic efficiency, what price should it require the monopoly to charge?

c.To achieve economic efficiency, what quantity will the regulated monopoly produce?

d.Will the regulated monopoly make a profit if it charges the price that will achieve economic efficiency?

e.Suppose the government decides to regulate the monopoly by imposing a price ceiling of $35. What quantity will the monopoly produce and what price will the monopoly charge?

f.With the price ceiling of $35, what profit will the monopoly earn?