Module 39

What is true of a monopoly?

Monopolies can be created by patents.

True or False: Monopolists typically charge higher prices given that consumers do not have the ability to get the same product from a competitor.

True

What is true about the costs and benefits of patents?

- Direct costs of patents include writing, filing, and enforcing them. - Companies must pay license fees to use an invention protected by a patent. - The benefits to society include an increased incentive for innovation.

What is a characteristic of a perfectly competitive market?

- Identical products are sold by multiple businesses. - Each business is a price taker. - There are significant barriers to entry.

What is true of FTC antitrust intervention?

- The key law governing antitrust issues in the United States is the Sherman Antitrust Act of 1890. - The FTC reviews mergers and investigates existing companies to see if they are behaving like monopolies. - Companies can always challenge FTC decisions in court.

Patents are _____________.

- form of government-granted monopoly - intended to encourage innovation in science and the arts - mentioned specifically in the U.S. Constitution

What is an argument in favor of government allowing companies to monopolize an industry?

For an industry such as water, it is more efficient for there to be only one company.

One of the largest mergers in U.S. history occurred in 2000 when AOL—an Internet service provider and provider of online software—purchased Time Warner, a large print-and-television media company. This is an example of a _____________.

conglomerate merger

What has the largest barrier to entry?

opening a new commercial bank