Question

QUESTION 1 Which one of the ways below can a monopolist or oligopolist gain market power? O a. No Barriers to entry O b. Government anti-trust legislation O Control of Key Inputs d. Competition QUESTION 2 Which of the cost structures below most likely belong to a natural monopolist? O a. TC = 10Q + 1002 b. TC = 500+ 100 OCTC = 500 + 1003

Answer 1

Question 1) One of the ways by which a monopolist or oligopolist can gain market power is by the control of Key Inputs. By doing so, the exisiting firms will not let the new firms enter the market and would have the market power.

So, option c is the correct answer.

Question 2) A natural monopolist’s cost function is like they have a hugh fixed cost and the marginal cost of producing the good is roughly constant or very low. So, for the total cost function in option b, we can see that there is a high cost of 500 and the marginal cost of producing the output is constant at 10. So, the cost structure that most likely belongs to a natural monopolist is TC = 500+10Q.

So, option b is the correct answer.

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