Open Word and answer the following questions. Save the document and print it when you are done.
1. DeBeers is an internationally famous company that has a monopoly over diamonds.
A) What is their barrier to entry?
B) Google "synthetic diamonds" (using the quotation marks in your search) to learn about this threat to DeBeers. Based on your search results, do you think DeBeers will be able to maintain its monopoly? Include web citations for supporting evidence.
2. Use Word's Drawing Tools to depict a monopoly shutting down in the short run. Explain the graph.
3. In the ConOpt sheet, set the demand intercept (cell B13) to 9 and the fixed cost (B18) to 180. Run Solver. Why is Solver generating a miserable result? What is the correct answer?
4. Use Word's Drawing Tools to depict the effect of monopoly from the input side profit maximization perspective. Explain the graph. Hint: With perfect competition, L∗ is found where w = MRPL (where MRPL is based on the given, constant price, PxMPL). With monopoly, however, P and MR diverge.
5. Is the effect of monopoly on the input side consistent with the effect of monopoly on the output side? Explain.