Williams BBA 2501 Unit 5
Chapter 9 Question

List three barriers to entry and explain how each can help create market power

1. (Barriers to Entry) Explain how economies of scale can be a barrier to entry.

2. (Barriers to Entry) Identify the other two barriers to entry and explain how they block new firms from this market. 9-2 Distinguish marginal revenue and average revenue for a monopolist, and explain why marginal revenue is less than average revenue

3. (Monopoly) Suppose that a certain manufacturer has a monopoly on the sorority and fraternity ring business (a constant-cost industry) because it has persuaded the “Greeks” to give it exclusive rights to their insignia.

a. Using demand and cost curves, draw a diagram depict- ing the firm’s profit-maximizing price and output level.

b. Why is marginal revenue less than the price for this firm?

c. On your diagram, show the dead weight loss that occurs because the output level is determined by a monopoly rather than by a competitive market.

d. What would happen to price and output if the Greeks decided to charge the manufacturer a royalty fee of $3 per ring? 9-3 Determine the profit-maximizing or loss-minimizing p

8. (Conditions for Price Discrimination) List three conditions that must be met for a monopolist to price discriminate successfully.

10. (Perfect Price Discrimination) Why is the perfectly dis- criminating monopolist’s marginal revenue curve identical to the demand curve it faces?

Chapter 10 Question

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