Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Question
Chapter 23, Problem 23.6IP
To determine
The incentive conflict controlled by the loyalty payments.
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Firms violating antitrust laws are likely to be sued by the federal government, but not by rival firms.true or false
Firms violating antitrust laws are likely to be sued by the federal government, but not by rival firms. true or false
The antitrust law that made "every contract, combination . . . or conspiracy, in restraint of trade" illegal was the
Clayton Act.
Federal Trade Commission Act.
Sherman Act.
Robinson-Patman Act.
Celler-Kefauver Act.
Chapter 23 Solutions
Managerial Economics: A Problem Solving Approach
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- Antitrust laws Cooperation among oligopolies runs counter to the public interest because it leads to underproduction and high prices. In an effort to bring resource allocation closer to the social optimum, public officials attempt to force oligopolies to compete instead of cooperating. Consider the following scenario: Suppose that the presidents of two auto manufacturing companies exchange text messages in which they discuss jointly raising prices on their new lines of hybrid SUVs. This illegal communication would violate which of the following laws? The Clayton Act of 1914 The Celler–Kefauver Act of 1950 The Sherman Antitrust Act of 1890 The Robinson–Patman Act of 1936arrow_forwardA few years ago, US antitrust officials faced the following case. Nestle, producers of Haagen-Dazs wanted to merger with Dreyers, another producer of what is called “superpremium” ice cream. Those opposing the merger pointed about the combined market share of Nestles and Dreyers would be 56% so that along with Unilever, producer of Breyers and Ben&Jerrys, three firms would sell 97% of this half-billion dollar market. Those in favor of the merger countered that the total supermarket ice cream sales are much greater, in excess of $1 billion because consumers can choose non-superpremium ice cream in which Nestle and Dreyer would command only 22% of the market and Unilver an additional 21%. What is the best way to measure the market for ice cream: superpremium or all supermarket ice cream? Should the merger have been allowed?arrow_forwardSuppose two brothers own identical skydiving companies but have decided to experiment with different pricing structures. The older brother’s company, Air Adventures, charges everyone the same price, while the younger brother’s company, Sky Warriors, sets its prices using a twotiered, price-discrimination model. Assuming that both companies face the same market demand curves, marginal costs, and costs of production, and wield significant market power for their service area, which of the following is most likely to occur? a. Air Adventures will generate a similar net revenue to Sky Warriors. b. Sky Warriors will generate a higher net revenue than Air Adventures. c. Sky Warriors will generate a lower net revenue than Air Adventures. d. Air Adventures will generate a higher net revenue than Sky Warriors. e. Sky Warriors will eventually switch to the Air Adventures model.arrow_forward
- (Origins of Antitrust Policy) Identify the type of anticompetitive behavior illustrated by each of the following: A university requires buyers of season tickets for its basketball games to buy season tickets for its football games as well. Dairies that bid on contracts to supply milk to school districts collude to increase what they charge. The same individual serves on the boards of directors of General Motors and Ford. A large retailer sells merchandise below cost in certain regions to drive competitors out of business. A producer of soft drinks sells to a retailer only if the retailer agrees not to buy from the producer’s major competitor.arrow_forwardIs the following statement correct? "The antitrust laws in reality deal less with monopolies than with oligopolies."arrow_forwardSuppose that two firms in an industry that has a Herfindahl index of 1,000 announce a merger. The U.S. Justice Department concludes the merger will boost the index to 1,050. The antitrust authorities will most likely Multiple Choice allow the merger, but only if foreign entry to the industry is possible. ignore this merger because of the relatively small size of, and increase in, the Herfindahl index. prevent the merger. allow the merger, but strictly regulate the prices set by the new combi ned firm.arrow_forward
- A key difference between monopoly and perfect competition is options: the demand curve faced by a perfectly competitive firm is different than the industry demand curve, but the demand curve faced by the monopolist is the same as the industry demand curve. Perfectly competitive firms have considerably more market power compared to monopolists. Price equals marginal revenue for a monopolist, but not for a perfectly competitive firm. the demand curve faced by a monopolist is different than the industry demand curve, but the demand curve faced by a perfectly competitive firm is the same as the industry demand curve.arrow_forwardWhich of the following is true of antitrust laws in the United States? Group of answer choices Economists unanimously agree on the usefulness of antitrust action to increase the competitiveness of industries. They were embedded in the U.S. Constitution but mostly eliminated in the early 1900s. The Sherman Act in 1980 eliminated and repealed all existing U.S. anti-trust laws. Historically they have been abused by some competitors going after other competitors in ways that are detrimental to consumers.arrow_forwardDiscuss key Antitrust legislation.arrow_forward
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