1. Classify the following as a government-enforced barrier to entry, a barrier to entry that is not government-enforced, or a situation that does not involve a barrier to entry.
   1. A patented invention
   2. A popular but easily copied restaurant recipe
   3. An industry where economies of scale are very small compared to the size of demand in the market
   4. A well-established reputation for slashing prices in response to new entry
   5. A well-respected brand name that has been carefully built up over many years
2. Why are generic pharmaceuticals significantly cheaper than name brand ones?
3. Draw a monopolist's demand curve, marginal revenue, and marginal cost curves. Identify the monopolist's profit-maximizing output level. Now, think about a slightly higher level of output (say Q0 + 1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?
4. Intellectual property laws are intended to promote innovation, but some economists, such as Milton Friedman, have argued that such laws are not desirable. In the United States, there is no intellectual property protection for food recipes or for fashion designs. Considering the state of these two industries, and bearing in mind the discussion of the inefficiency of monopolies, can you think of any reasons why intellectual property laws might hinder innovation in some cases?
5. How is the demand curve perceived by a perfectly competitive firm different from the demand curve perceived by a monopolist?
6. Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Firm A) is large and the other firm (Firm B) is small, as shown in the prisoner's dilemma box in the following table.

	Firm B colludes with Firm A	Firm B cheats by selling more output
Firm A colludes with Firm B	A gets $1000, B gets $100	A gets $800, B gets $200
Firm A cheats by selling more output	A gets $1050, B gets $50	A gets $500, B gets $20

Assuming that the payoffs are known to both firms, what is the likely outcome in this case?

7. Does each individual in a prisoner's dilemma benefit more from cooperation or from pursuing self-interest? Explain briefly.

8. Jane and Bill are apprehended for a bank robbery. They are taken into separate rooms and questioned by the police about their involvement in the crime. The police tell them each that if they confess and turn the other person in, they will receive a lighter sentence. If they both confess, they will be each be sentenced to 30 years. If neither confesses, they will each receive a 20-year sentence. If only one confesses, the confessor will receive 15 years and the one who stayed silent will receive 35 years. The table below represents the choices available to Jane and Bill. If Jane trusts Bill to stay silent, what should she do? If Jane thinks that Bill will confess, what should she do? Does Jane have a dominant strategy? Does Bill have a dominant strategy? A = Confess; B = Stay Silent. (Each results entry lists Janes's sentence first (in years), and Bill's sentence second.)

	Jane
A	B
Bill	A	(30, 30)	(15, 35)
B	(35, 15)	(20, 20)