1. Are McDonald’s and Starbucks monopolies? Why or why not?

2. Explain why MR < P for the monopolist, but MR = P for perfectly competitive firms.

3. What do economists mean when they call monopolies inefficient? What is the deadweight loss of monopoly?

4. Why are monopoly firms able to earn long-run economic profits while perfectly competitive firms cannot?

5. Under what market conditions would a firm find it easier to engage in price discrimination?

6. What is a natural monopoly and why is such a monopoly often regulated by government?

7. How important is the existence of a significant barrier to entry to maintaining a monopoly? What would be the result if a monopoly market could easily be entered? Why might a monopoly in a high-tech field such as computers, the Internet, and consumer electronics be rather short-lived?

8. One can typically find a high-quality color laser printer for $300, which comes pre-installed with four color-toner cartridges that are about half-filled. However, the cost of replacing all four toner cartridges is usually over $400. Why would companies charge more to replace the toner than to buy the printer itself?

9. The taxi industry in many large cities spends millions of dollars lobbying local policymakers not to build rail links connecting airports to the city center, even if such mass transportation infrastructure would benefit many consumers traveling to and from the airport. Explain why such actions by the taxi industry are taken. Then, explain why taxi owners in cities without airport rail links are less likely to invest in fuel-efficient cars and in-taxi technologies such as televisions and Internet access.

10. If the Miami Heat can sell five courtside seats for $2,000 each or six courtside seats if it reduces the price to $1,600 each, what is the marginal revenue of the sixth seat? Should the owner make this sixth seat available? If all six seats can be sold for $1,800 each, would this make the sixth seat worth selling? (Hint: What costs are involved with selling the sixth seat?)

11. Sally owns the only cake shop in town (she is a monopolist). At a quantity of five, the marginal cost of producing one more cake is $12, while the marginal revenue from selling one more cake is $10. In order for Sally to maximize profits, should she increase or decrease output? Should she increase or decrease prices? Explain.

12. Airlines that compete against one another have at times merged with each other to create a larger airline. What are some factors that would determine whether such a merger would constitute an uncompetitive environment according to antitrust law?

13. In December 2014 United Airlines and Orbitz Travel sued a 22-year-old person who had created a Web site helping travelers save money using a technique called “hidden-city ticketing” (CNN Money, December 29, 2014). Hidden-city ticketing works when one desires to travel non-stop between an airline’s major hubs (such as Houston to Denver on United), but can find a less expensive fare by booking a connecting flight from Houston to, say, Colorado Springs via Denver, and then simply not taking the connecting flight. Why would an airline charge more for a single flight than one that continues onward to another destination? Because courts have ruled against the airlines, what can they do to prevent customers from resorting to this technique?

14. In November 2015 Marriott Hotels announced that it would acquire its rival, Starwood Hotels, creating the world’s largest hotel chain. Look at each hotel chain’s Web site and list all of the specific hotel brands operated by Marriott and Starwood that would now be managed by this merged company. Given that so many hotel brands are involved, why would this merger be allowed? Wouldn’t it create a near monopoly in the hotel market? What other types of lodging compete against hotels?

15. Using the accompanying figure for a monopoly firm, answer the following questions.

16. The following table represents the sales figures for the eight largest firms in the auto industry in the United States in 2014:

17. According to By the Numbers, assuming that the number of viewers for each of the five games in the 2015 NBA Finals were the same, approximately how many more people watched the 2015 Super Bowl than the final game of the 2015 NBA Finals?

18. According to By the Numbers, the annual growth in demand for electricity has fallen over the past half-century, but remained positive nearly every year. In what years did actual electricity demand fall (negative growth in demand)?