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What are the major differences between Artificial Monopolies and Natural Monopolies? Why do national/state/local governments enforce AntiTrust Laws to break-up artificial monopolies, while state and

  • What are the major differences between Artificial Monopolies and Natural Monopolies?

  • Why do national/state/local governments enforce AntiTrust Laws to break-up artificial monopolies, while state and local governments simply use public utility commissions to provide oversight for the ongoing operations of natural monopolies?
  • Use the pure theory of monopoly to respond to these questions:

  • For any pure monopoly with market power, what is the relationship between Product Price (P) and Marginal Revenue (MR) at any one level of output Q? Why?

  • Why will the managers of a pure monopoly produce a level of output Q* where Marginal Revenue (MR) = Marginal Cost (MC)?

  • To maintain its market position as a monopoly, the monopoly must maintain and protect its "high barriers to entry".

  • What do we mean by "high entry barriers", and how is this different from the "free-entry and free-exit" conditions that charaterize perfect competition?

  • How do each of the following market characteristics provide monopolies with high entry barriers?
    • Patents, trademarks and similar types of intellectural property rights
    • Government authorized licenses and franchises
    • A monopolist's exclusive control over critical resources

  • McGuigan suggests that a monopoly, oligopoly or a monopolistic competitor can make an intentional effort to maintain/protect its market power by employing a "strategy map to engage in value creation". Explain the three key aspects of McGuigan's value creation strategy, as well as offering a comprehensive description of how eacch of the sub-components of the three aspects contribute to a monopoly's ongoing value creation (protecting itself from new competition or entry into its industry).

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