Natural Monopoly Review

Which of the following types of Monopoly experiences decreasing ATC with increasing output?

• Natural

• Technological

• Government

• Geographic

What prevents firms from entering a monopoly?

• Barriers to Entry

• Technology

• Price

• Barriers to Travel

Which of the following industries is an example of a monopoly?

• utilities/water

• department stores

• auto industry

• commercial airlines

Government monopoly

• monopoly created and or owned by the government

• the exclusive legal right, given to an originator or an assignee to print, publish, perform, film, or record literary, artistic, or musical material, and to authorize others to do the same.

• market structure in which the average costs of production are lowest when all output is produced by a single firm

• a government authority or license conferring a right or title for a set period, especially the sole right to exclude others from making, using, or selling an invention.

Match the labels with the correct points.

a

b

c

Price for an unregulated monopoly

Price for the Socially Optimal output

The cost at the Socially Optimal output

What is the Fair Return price for this firm?

• $12

• $18

• $24

• $8

What is the dollar value of the subsidy government would need to provide this monopolist to operate at the socially optimal output?

• $2000

• $12,000

• $2

• $20

At what price would the monopolist make zero economic profit?

• $8

• $12

• $18

• $24

What would be the profit earned by the unregulated monopolist?

• $0

• $8,000

• $12,000

• $24,000

What is the output level for fair return?

• 2,000

• 4,000

• 5,000

• 6,000