Essentials of Economics
Essentials of Economics
4th Edition
ISBN: 9781464186653
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
Question
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Chapter 8, Problem 1P
To determine

Concept Introduction:

Monopoly: This refers to the condition in a market where there is a single person or company who sells a particular good or service and there is no competitor. In a monopoly, the supplier is free to fix any price since the consumers have no alternative available.

Expert Solution & Answer
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Explanation of Solution

a. Merck Company, the producer of the patented cholesterol-lowering drug Zetia.

  • In the given case, Merck Company produces the drug which is patented by the government. This implies that no other producer in the market can produce drug Zetia.
  • Hence, Merck Company has the monopoly over the production of the drug, protected by the government.

Conclusion:

Thus, Merck Company has a monopoly in drug Zetia.

b. WaterWorks Company, a provider of piped water.

  • In the given case, WaterWorks Company has the market power in the supply of piped water.
  • There are huge fixed costs involved in the provision of piped water to the households. This implies that the average total cost is low.
  • Hence, due to the huge fixed costs, small firms do not prefer to enter into the market, which results in a natural monopoly to WaterWorks Company over the supply of piped water.

Conclusion:

Thus, WaterWorks Company has a natural monopoly.

c. Chiquita Company, a supplier of bananas and owner of most banana plantations.

  • Chiquita Company has the market power to supply bananas to the consumers as it owns most of the banana plantations.
  • Due to this ownership in plantations, the company restricts the other suppliers to enter into the market and holds a position of monopoly.

Conclusion:

Thus, Chiquita Company has a monopoly in banana supply.

d. Walt Disney Company, the creators of Mickey Mouse character.

  • In the given case, Walt Disney Company has the copyright over the character created by it. This implies that no other company in the industry can use the same character in their production.
  • Hence, Walt Disney Company has the monopoly over the Mickey Mouse character, protected by the government.

Conclusion:

Thus, Walt Disney Company has monopoly over the Mickey Mouse character.

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