Are there any cases where a monopoly is beneficial to the economy?
What will be an ideal response?
Firms that are allowed monopoly profits search out every possible avenue for innovative technologies that they can bring to market. If there were perfect competition, firms would have less of a reason to invest in research and development because they would not enjoy the same levels of profit from innovation. Through entry, economic profits would be driven to zero in the long run. If innovators are not granted protection, profits may not be available to spur invention. So, granting patents and copyrights involves a tradeoff between the deadweight loss of a monopoly and the incentive for research and development. It may also be the case that the firm is a natural monopoly, which means it will enjoy economies of scale that make it more efficient for a single firm to operate in the market. Splitting supply between firms will leave each seller with higher costs and lower profits.
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The Arrow impossibility theorem explains
A) why government regulation of private markets will always result in a reduction in economic efficiency in these markets. B) why voters are always rationally ignorant. C) why there is no system of voting that will consistently represent the underlying preferences of voters. D) why it is not possible to provide the economically efficient amount of any public good.
Currency devaluations help suppliers because they make exports ________ expensive
a. Less b. More c. All of the above d. None of the above
Under the Bretton Woods agreements,
a. the IMF was created to punish countries that did not maintain fixed exchange rates. b. a system of fixed exchange rates based on gold was established. c. each country agreed to buy and sell its currency to maintain a fixed exchange rate. d. All of the above are correct.
In the supply and demand model, a subsidy granted to buyers is illustrated by
a. a downward shift in the demand curve, by the per unit amount of the subsidy. b. an upward shift in the demand curve, by the per unit amount of the subsidy. c. a downward shift in the supply curve, by the per unit amount of the subsidy. d. an upward shift in the supply curve, by the per unit amount of the subsidy.