158.To define a monopoly, we cite the following characteristics: (i) and (ii). (i) The firm is the sole seller of itsproduct.(ii) The firm's product does not haveclose substitutes.(iii) The firm generates a largeeconomic profit.(iv) The firm is located in a smallgeographic market.

14-The maximum profit available to this firm is $5.

Since natural monopolies have a declining average cost curve, regulating natural monopolies by setting price equal to marginal cost would cause the monopolist to operate at a loss.

Antitrust laws allow the government to prevent mergers.

14-The additional revenue a firm in a competitive market receives if it increases its production by one unit equals its marginal revenue.

Roundtrip airline tickets are usually cheaper if you stay over a Saturday night before you fly back. The reason for this price discrepancy is that airlines are practicing imperfect price discrimination to raise their profits.

157.Examples of barriers to entry include (i) A key resource is owned by a single firm, (ii) The costs of production make a single producer more efficient than a large number of producers, or (iii) The government has given the existing monopoly the exclusive right to produce the good.

For a monopolist, profit is determined by Profit = Total Revenue - Total Cost

For a profitmaximizing monopolist, P > MR = MC.

A perfectly pricediscriminating monopolist is able to maximize profit and produce a sociallyoptimal level of output.

14-For a competitive firm, Profit = Total revenue - Total cost.

Price discrimination requires the firm to separate customers according to their willingness to pay.

155.A monopoly has the ability to set the price of its product at whatever level it desires.

14-2.When a firm has little ability to influence market prices it is said to be in a competitive market.

14-The assumption of a fixed number of firms is appropriate for analysis of the short run, but not the long run.

14-3.In a competitive market, the actions of any single buyer or seller will have a negligible impact on the market price.

14-A long-run supply curve that is flatter than a short-run supply curve results from the fact that firms can enter and exit a market more easily in the long run than in the short run.

14-8.For a firm in a perfectly competitive market, the price of the good is always equal to marginal revenue.

Allowing an inventor to have the exclusive rights to market her new invention will lead to (i) (ii) and (iii). (i) a product that is priced higherthan it would be without the exclusive rights.(ii) desirable behavior in the sense that inventors are encouraged to invent.(iii) higher profits for the inventor.