Study Microeconomics

You decide to get a head start on the economics problem set due next week. Whipping out your notes, you take a quick look through the questions. This doesn’t seem so bad. Maybe Professor Ward is all bark and no bite?

The first section tells you to work out whether the following statements are True/False/Uncertain. That seems easy enough, until you read the footnote that says credit for the answer will be based entirely on your justification, and not at all upon your final answer. That’s still not too bad. You read the first question:

“1. Assume that MindGeek (owner of PornHub, RedTube, Brazzers, etc.) has a 50% market share in the porn industry, and imagine that they acquire xHamster, which we’ll say has a 10% market share. Antitrust regulators should be more worried if their combined market share rose to 75% in coming years, instead of dropping to 50%.”

What kind of a question is this, even? You immediately mark down ‘True’, but then realise that you have to explain your answer.

You don’t even have to check your notes for this one. Companies grow their market share when other businesses are **** to drop out, and barriers to entry prevent new ones from joining. This is anti-competitive and bad. Duh.

But then something itches at you. The problem can’t be this easy, can it? You flip through your notes, looking for something you can use to bolster your answer, when you come across the section on monopolies. It suddenly hits you — monopolies are bad, because they restrict their output below the socially optimal quantity, overcharging consumers in the process and creating deadweight loss.

But then… that would mean, if the MindGeek-xHamster merger were to result in a lower market share — by quantity of porn subscriptions sold, or whatever — it could be a result of MindHamster gaining more market power, and restricting their own output to reap the benefits of monopoly pricing… which would make the answer false.

Now you’re confused. You pace around the room, trying to work out which explanation is correct, when you realise that there’s an ‘Uncertain’ answer for a reason. You jot down your reasoning, scratch out the ‘True,’ and take a look at the second question.

“2. Single students should masturbate more than students in a relationship, assuming that sex and masturbation are substitutes.”

You almost immediately write down ‘True’ again, but then catch yourself. Think through the problem carefully first! You groan, knowing that this is going to be a long night…

Over an hour later, you get up from the desk, absolutely drained. You’ve worked your way through the battery of True/Falses, but are really only sure of your answer in maybe one case. It's time to head to bed.