1. Classify the following as a government-enforced barrier to entry(A), a barrier to entry that is not government-enforced(B), or a situation that does not involve a barrier to entry(C).

(__)A city passes a law on how many licenses it will issue for taxicabs

(__)A city passes a law that all taxicab drivers must pass a driving safety test and have insurance

(__)A well-known trademark

(__)Owning a spring that offers very pure water

(__)An industry where economies of scale are very large compared to the size of demand in the market

2. 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?

3. 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 (increase, reduce, remain the same)? Explain.

4.Why are generic pharmaceuticals significantly cheaper than name brand ones? (short answer, 2 or 3 lines)

5.Use the following table to calculate the four-firm concentration ratio for the U.S. auto market. Does this indicate a concentrated market or not?

GM

19%

Ford

17%

Toyota

14%

Chrysler

11%

Honda

10%

Nissan

7%

Hyundai

5%

Kia

4%

Subaru

3%

Volkswagen

3%

9.Use the previous table to calculate the Herfindal-Hirschman Index for the U.S. auto market. Would the FTC approve a merger between GM and Ford?

Use the following table to answer the following questions. Demand: Quantity 2 3 4 5 6 7 8 10 Price 10 9 8 7 6 5 4 3 2 Marginal Revenue 10 8 6 4 2 0 -2 -4 -6 -8 Costs: Marginal Cost 9 6 5 3 2 3 4 5 7 10 Average Cost 9 7.5 6.7 5.8 5 4.7 4.6 4.6 4.9 5.4