Market Share Projection - U.S. Department of Justice - Microsoft

Review the "Exhibit 1" evidence presented by the U.S. Department Justice during the Microsoft "antitrust" trial to convince the federal judge that Microsoft was a monopoly.

• Is Microsoft Corporation a monopoly? What potential barriers to entry may exist? (Hint: visit www.Microsoft.com)
• Review the Federal Court ruling on the existence of "barriers to entry." Explain how monopolies can earn "above-normal" profit.
• Enter "Microsoft" in the "Search the Site" box at opensecrets.org and access the related documents. Explain why Microsoft spends millions of dollars in political contributions (Hint. Consider rent seeking).
  

The DeBeers Diamond Cartel

Read the introduction and first two sections of Muireann A. Kelliher's article entitled "Diamonds are Forever: An Econometric Investigation" (the "Specification" section -- and subsequent sections of the paper - require the use of mathematical tools beyond the scope of an introductory economics course).
a. The author suggests that the objective of DeBeers is to engage in "long-run revenue maximisation." Is this the same as long-run profit maximisation? Explain.
b. Use a diagram containing demand, marginal revenue, and marginal cost curves to illustrate the optimal levels of price and output for a revenue-maximising firm. In the same diagram, illustrate the optimal levels of price and output for a profit-maximising firm.
c. Summarise the author's arguments concerning the six methods that DeBeers uses to maintain its monopoly control over the diamond market. As part of your discussion explain how each of these factors enhances De Beers' monopoly power.

Regulation - California's Electric Industry

Read Chapter 1 in the California Energy Commission's 1994 electricity report.
a. Explain why the authors of this document claim that a monopoly is required to handle the transmission of electricity. Use a diagram to illustrate the shape of the long-run average cost curve for such a firm.
b. Why might it be appropriate to introduce competition in the generation and sale of electricity while maintaining the distribution of electricity as a regulated monopoly? Explain the argument behind this "unbundling."

Regulation - New York State Public Services Commission

Examine the list of utilities that are regulated by the New York State Public Services Commission.
a. What shared characteristic of each of these industries results in the existence of a "natural monopoly?"
b. Read the descriptions of the revisions in the regulatory structure of electric power distribution. Describe the differences between the old regulatory structure and the new structure. What is the rationale for this change?