Chapter 15 Monopoly and Antitrust Policy 1. The German company Koenig & Bauer has 90 percent of the world market for presses that print currency. Discuss the factors that would make it difficult for new companies to enter this market. (10 points) 2. Suppose that the quantity demanded per day for a product is 90 when the price is $35. The following table shows costs for a firm with a monopoly in this market: Briefly explain whether this firm has a natural monopoly. (10 points) 3. Ed Scahill has acquired a monopoly on the production of baseballs(don’t ask how) and faces the demand and cost situation shown in the following table: a) Fill in the remaining values in the table. (10 points) b) If Scahill wants to maximize profit, what price should he charge, and how many baseballs should he sell? How much profit (or loss) will he make? (10 points) c) Draw a graph to illustrate your answer. Your graph should be clearly labeled and should include Scahill’s demand, ATC, AVC, AFC, MC, and MR curves, the price he is charging, the quantity he is producing, and the area representing his profit (or loss). (20 points) d) Suppose that the government raises the tax in part (c) to $ 70,000. Now what price should Scahill charge, how many baseballs should he sell, and what will his profit (or loss) be? (10 points) e) Will his decision on what price to charge and how much to produce be different in the short run than in the long run after the government tax increase? Briefly explain. (10 points) 4. Suppose that the city has given Jorge a monopoly selling baseball caps at the local minor league stadium. Use the following graph to answer the questions: a) What quantity will Jorge produce, and what price will he charge? (10 points) b) How much profit will he earn? (10 points)
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