ECONOMICS - UPDATED
20th Edition
ISBN: 9781259795862
Author: McConnell
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
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Question
Chapter 21, Problem 2RQ
To determine
Antitrust scheme and when the merger is permitted.
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The table shows market shares of firms in hypothetical industries. Assume these are distinct industries with no buyer-seller relationships or competition among
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10. Questionable business practices according to antitrust agencies
Complete the following table by matching each of the scenarios to the concept of resale price maintenance, predatory pricing, or tying.
Predatory
Pricing
Scenario
SnapFace is a firm that manufactures polaroid cameras. Suppose SnapFace sells its polaroid
cameras to online retailers for $159 each and requires those online retailers to charge at least
$179 to shoppers for each polaroid camera.
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conditioner, and Breezy Hut sells each air conditioner for $1,200. After Gregale, a new firm with
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air conditioners for a price of $550.
Wally's sells a wide variety of skateboards to retail sporting good outlets. Wally's recently rolled out
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Question 1.Assume there are only two art auction companies who account for 100% of all the sales of 19thCentury impressionist master work paintings in the world. Assume that each company buys thiskind of painting and then resells the paintings at monthly auctions. Ignoring the question of anylaws that might apply, describe what economic arrangement would maximize the twocompanies’ total profits? Show with supply and demand curves what profit they would makefrom this arrangement and what societal welfare loss, if any, results from it.
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- How would you expect antitrust authorities to react to the following? a. A proposed merger of Ford and General Motors. O They would block this horizontal merger because it violates Section 7 of the Clayton Act. O They would block this horizontal merger because it violates Section 1 of the Sherman Act. O They would allow this horizontal merger unless both firms had very large market shares and the resultant merger would substantially lessen competition. b. Evidence of secret meetings by contractors to rig bids for highway construction projects. O They would allow this. O They would charge these firms with price-fixing, which violates Section 7 of the Clayton Act. O They would charge these firms with price-fixing, which violates Section 1 of the Sherman Act. C. A proposed merger of a large shoe manufacturer and a chain of retail shoe stores. O They would block this merger because it violates Section 7 of the Clayton Act. O They would block this merger because it violates Section 1 of the…arrow_forward4. Questionable business practices according to antitrust agencies Complete the following table by indicating whether each of the scenarios describes the concept of tying, bottleneck, or predatory pricing. Scenario Snackyville sells a wide variety of snacks to retail grocery stores. Snackyville recently released two new snacks: a popular trail mix and a much less popular granola bar. Snackyville requires grocery stores to buy 15 cases of the granola bar for every 120 cases of the trail mix ordered. Heat-Em-Up is the only firm producing grills. It costs $410 to produce a grill, and Heat-Em-Up sells each grill for $950. After Well Done, a new firm with the same costs as Heat-Em-Up, enters the market for grills, Heat-Em-Up starts selling its grills for a price of $330. Union Southwest is a railroad company that built and owns the only bridge to and from Coronado island to the mainland United States. Since there are no airports or boating docks in Coronado, any firms that want to ship…arrow_forward10. Questionable business practices according to antitrust agencies Complete the following table by matching each of the scenarios to the concept of resale price maintenance, predatory pricing, or tying. Predatory Pricing Scenario Warm Winds is the only firm producing air fryers. It costs $430 to produce one air fryer, and Warm Winds sells each air fryer for $950. After Sirocco, a new firm with the same costs as Warm Winds, enters the market for air fryers, Warm Winds starts selling its air fryers for a price of $330. Citron is a firm that manufactures electric scooters. Suppose Citron sells its electric scooters to online retailers for $810 each and requires those online retailers to charge at least $840 to shoppers for each electric scooter. RightRound sells a wide variety of records to retail record stores. RightRound recently pressed two new records: a popular pop punk album and a much less popular smooth jazz album. RightRound requires record stores to order 15 copies of the…arrow_forward
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