5. Suppose demand for a monopoly’s product falls so that its profit-maximizing price is below average

variable cost. How much output should the firm supply? Hint: Draw the graph.

6. Imagine a monopolist could charge a different price to every customer based on how much the customer is

willing to pay. How would this affect monopoly profits?

Review Questions

7. How is monopoly different from perfect competition?

8. What is a barrier to entry? Give some examples.

9. What is a natural monopoly?

10. What is a legal monopoly?

11. What is predatory pricing?

12. How is intellectual property different from other property?

13. What legal mechanisms protect intellectual property?

14. In what sense is a natural monopoly “natural”?

15. How is the demand curve perceived by a perfectly competitive firm different from the demand curve

perceived by a monopolist?

16. How does the demand curve perceived by a monopolist compare with the market demand curve?
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