a. A city passes a law on how many licenses it will issue for taxicabs

b. A city passes a law that all taxicab drivers must pass a driving safety test and have insurance

c. A well-known trademark

d. Owning a spring that offers very pure water
e. An industry where economies of scale are very large compared to the size of demand in the market

3. Suppose the local electrical utility, a legal monopoly based on economies of scale, was split into four firms

of equal size, with the idea that eliminating the monopoly would promote competitive pricing of electricity.

What do you anticipate would happen to prices?

4. If Congress reduced the period of patent protection from 20 years to 10 years, what would likely happen to

the amount of private research and development?

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.
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