Chapter Questions
True or false? It is obvious that all for-profit businesses in the United States will maximize profit. Why?
Describe the monitoring problem. How does an incentive-compatible contract address the monitoring problem?
Define $X$ -inefficiency. Can a perfect competitor be X-inefficient? Explain why or why not.
Some analysts have argued that competition will eliminate X-inefficiency from firms. Will it? Why?
True or false? If it were easier for consumers to collude than for suppliers to collude, there would often be shortages of goods. Why?
Demonstrate graphically the net gain to producers and the net loss to consumers if suppliers are able to restrict their output to $Q_{r}$ in the accompanying graph. Demonstrate the net deadweight loss to society.
Up to how much is the monopolist depicted in the accompanying graph willing to spend to protect its market position? Demonstrate your answer graphically.
True or false? Platform monopolies should be broken up to improve competition. Why?
True or false? Monopolies are bad; patents give firms monopoly; therefore, patents are bad. Why?
Taking into consideration changing technologies, why might the competitive process not lead to the most efficient outcome?
How do network externalities increase the winner-take-all nature of a market?
True or false? Technically competent firms will succeed. Why?