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Compare the efficiency of monopolistic and perfectly competitive markets.
1. Discuss the economic factors that lead to the development of monopolies. Examples of monopolies include electric utilities, railroads, airlines, cable television, and sports leagues. Try to focus your answer on a specific industry.
2. Governments grant temporary monopolies through patents and copyrights to pharmaceutical companies, authors, and artists. Consider the trade-offs that society must make when granting those temporary monopoly rights.
3. Given what you know about perfectly competitive markets, compare the efficiency of monopoly and perfect competition. Which is more efficient? Explain your reasoning and try to illustrate with a hypothetical example.
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As output increases a firm finds that its marginal cost of producing an additional unit is rising. From this information we know that
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