Economics For Today

10th Edition
Publisher: Cengage Learning
ISBN: 9781337613040



Economics For Today

10th Edition
Publisher: Cengage Learning
ISBN: 9781337613040
Chapter 13, Problem 2SQ
Textbook Problem

Price discrimination that tends to lessen competition is outlawed by the

  1. a. Sherman Act.
  2. b. Clayton Act and amended by the Robinson–Patman Act.
  3. c. Federal Trade Commission Act.
  4. d. Interstate Commerce Act.

To determine

The anti-trust law that prohibits the price discrimination.

Explanation of Solution

The market competition is the situation in which there are many sellers and buyers in the market. When there are many competitors in the market, there will be competition among them in price, quality and quantity. This competition is very important for the healthy market economy. There are many actions that reduces the market competition and one amongst them is the cartelization which is the process of making a formal group of sellers that agrees to sell the product at a unified higher price and controlling the market supply. Such actions are being controlled by the anti-trust laws in the US economy. Thus, the laws are also known as the competition laws that prevents the consumers from the predatory business practices.

Option (b):

The Clayton antitrust law was also introduced in the year of 1914 and it was an addition to the US anti-trust laws as it added further substances to make the anti competitive measures strict. It prevented the anticompetitive pricing and other actions in their incipiency. The Robinson-Patman act was introduced to the US anti-trust laws as a law to prevent the price discrimination practices by the sellers in the market. Thus, it was a price discrimination based law and that means the Clayton as well as the Robinson-Patman acts are forced to prevent the price discrimination that lessen the competition and that means option 'b' is the correct answer...

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