PROBLEMS & SOLUTIONS
P12.1 Monopoly Concepts. Indicate whether each of the following statements is
true or false, and explain why.
A. The Justice Department generally 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. When a single seller is confronted in a market by many small buyers,
monopsony power enables the buyers to obtain lower prices than those
that would prevail in a competitive markets.
C. A natural monopoly results when the profit-maximizing output level
occurs at a point where long-run average costs are declining.
D. Downward-sloping industry demand curves characterize both perfectly
competitive and monopoly markets.
E. A decrease in the price elasticity of demand would follow an increase in
monopoly power.