Regulation and Antitrust Policy (Econ 180) Drake University, Spring 2009 William M. Boal

Monopoly and Introduction to Antitrust

### Version A

I. Multiple Choice

(1)a. (2)b. (3)b. (4)c. (5)a. (6)a. (7)d. (8)a. (9)d. (10)b.

II. Problems

(1) [Marginal revenue, monopoly pricing: 22 pts]

1. Revenue = \$700, \$1200, \$1500, \$1600, \$1500;
2. Marginal revenue = \$50, \$30, \$10, \$-10;
3. 30 sweatshirts;
4. \$50.

(2) [Marginal revenue, monopoly pricing, welfare analysis: 24 pts]

1. \$16;
2. \$4;
3. Marginal revenue is a straight line with intercepts at P=\$19 and Q=950;
4. 600 devices;
5. \$13;
6. \$900.

(3) [Marginal revenue, monopoly pricing: 16 pts]

1. MR = 25 - (Q/100);
2. 2000;
3. \$15;
4. \$20,000.

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

1. \$60;
2. L = 2/3 = 0.667.

1. performance;
2. structure;
3. conduct;
4. structure;
5. conduct.

### Version B

I. Multiple Choice

(1)b. (2)c. (3)c. (4)b. (5)b. (6)b. (7)a. (8)b. (9)d. (10)c.

II. Problems

(1) [Marginal revenue, monopoly pricing: 22 pts]

1. Revenue = \$500, \$900, \$1200, \$1400, \$1500;
2. Marginal revenue = \$40, \$30, \$20, \$10;
3. 30 sweatshirts;
4. \$40.

(2) [Marginal revenue, monopoly pricing, welfare analysis: 24 pts]

1. \$12;
2. \$2;
3. Marginal revenue is a straight line with intercepts at P=\$13 and Q=1300;
4. 800 devices;
5. \$9;
6. \$800.

(3) [Marginal revenue, monopoly pricing: 16 pts]

1. MR = 35 - (Q/100);
2. 3000;
3. \$20;
4. \$45,000.

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

1. \$25;
2. L = 1/5 = 0.2.