Question
1. There are over 30 million firms in the U.S., of which about 5.8 million are corporations. A mere 35,000 of these corporations have annual
1. There are over 30 million firms in the U.S., of which about 5.8 million are corporations. A mere 35,000 of these corporations have annual sales of over $50 million, and this relative handful of corporations commonly thought of as "big business", account for over 80% of total corporate profits in this country. Are those millions of other corporations, sole proprietorships, and partnerships outside of big business fairly insignificant to the U.S. economy then? If not, then what is the importance of these smaller companies to the national economy?
2. Any company in the U.S. that plans to issue stocks or bonds is required by the Securities and Exchange Commission to provide its balance sheet and income statement to the public. Why is this requirement in place? What kind of information that would be useful to potential investors can be found in these financial statements?
3.. What are the four most important ways a firm becomes a monopoly? Will a monopoly that maximizes profit also be maximizing revenue? Will it be maximizing output? Explain.
4. Assume the graph below represents the market for a monopolist. What quantity will the monopolist produce, and what price will she charge? What will her total revenue, costs, and profit be at this level of production? What will the deadweight loss for society be at this level of production? (Assume the MC curve is a straight line between the relevant points for this calculation.)
5. U.S. antitrust laws are designed to prohibit monopolization and encourage competition. Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?
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