Evaluating Market Power: The Case of a Local Water Utility

A firm produces a unique product with a constant marginal cost of $30 per unit. It currently sells 200 units per week at a price of $50. At this price point, the firm's economists have calculated that the price elasticity of demand is 4.0. Based on this information, which of the following actions should the firm take to maximize its profit?

A pharmaceutical company that holds an exclusive patent for a new, highly effective cancer treatment drug operates as a pure monopoly.

A company is the sole producer and seller of high-speed passenger rail travel between two major cities. Despite being the only provider of this specific service, why would an economist argue that this company does not operate as a 'pure' monopoly?

The Economics of a Blocked View

The Limits of Being the 'Only Seller'

Each company listed is the sole provider of a specific product or service in its market. Match each company to the most significant form of competition it faces, which illustrates why a 'pure' monopoly with no competition is rare.

A technology firm develops and patents a new type of battery for electric vehicles that allows a car to travel 1,000 miles on a single charge. For the next 20 years, no other company can legally produce this specific type of battery. Which of the following factors most significantly limits this firm's ability to exercise pure monopoly power in the market?

Which of the following sole providers is most likely to exercise the highest degree of market power?

A pharmaceutical company holds the exclusive patent for a new eye drop that is the only product on the market capable of reversing a specific, common form of age-related vision loss. Which of the following developments would most significantly challenge its ability to operate like a pure monopoly?