Regulation and Antitrust Policy (Econ 180) Drake University, Spring 2007 William M. Boal

Monopoly and Introduction to Antitrust

### Version A

I. Multiple choice [2 pt each: 30 pts total]

(1)a. (2)d. (3)c. (4)a. (5)c. (6)d. (7)a. (8)c. (9)b. (10)b.
(11)c. (12)b. (13)d. (14)d. (15)d.

II. Problems

(1) [Marginal revenue, monopoly pricing: 26 pts]

1. \$800, \$1400, \$1800, \$2000, \$2000, \$1800;
2. \$6, \$4, \$2, \$0, \$-2;
3. 300 tee-shirts;
4. \$6.

(2) [Monopoly, markup formula, Lerner index: 8 pts]

1. \$75;
2. L = 1/3.

(3) [Monopoly: 36 pts]

1. increase;
2. \$2;
3. MR curve should have intercept at \$16 and slope of 1/5 (equation is MR = 16 - (Q/5));
4. increase;
5. \$12;
6. 60 units;
7. \$10;
8. \$180;
9. \$120.

### Version B

I. Multiple choice [2 pt each: 30 pts total]

(1)c. (2)d. (3)a. (4)d. (5)b. (6)a. (7)b. (8)a. (9)b. (10)d.
(11)a. (12)d. (13)b. (14)d. (15)d.

II. Problems

(1) [Marginal revenue, monopoly pricing: 26 pts]

1. \$1000, \$1800, \$2400, \$2800, \$3000, \$3000;
2. \$8 \$6, \$4, \$2, \$0;
3. 400 tee-shirts;
4. \$7.

(2) [Monopoly, markup formula, Lerner index: 8 pts]

1. \$40;
2. L = 1/4.

(3) [Monopoly: 36 pts]

1. increase;
2. \$4;
3. MR curve should have intercept at \$14 and slope of 1/10 (equation is MR = 14 - (Q/10));
4. increase;
5. \$10;
6. 80 units;
7. \$10;
8. \$160;
9. \$80.