P12.1 SOLUTION
A. True. Generally speaking, the Justice Department concerns itself with
significant or flagrant offenses under the Sherman Act, as well as with
mergers for monopoly covered by Section 7 of the Clayton Act.
B. False. When a single buyer is confronted in a market by many smaller sellers,
monopsony power enables the buyer to obtain lower prices than those that
would prevail in a competitive markets.
C. False. A natural monopoly occurs in a market when the market clearing price,
or price where Demand (Price) = Supply (Marginal Cost), occurs at an output
level where long-run average costs are declining.
D. True. Downward sloping demand curves follow from the law of diminishing
marginal utility and characterize both perfectly competitive and monopoly
market structures.
E. True. A decrease in the price elasticity of demand would result following an
increase in monopoly power.