18.1 Both
antitrust policy and industrial regulation deal with monopoly. What
distinguishes the two approaches? How does government decide to use one
form of remedy rather than the other?
Get solution
18.2 Describe
the major provisions of the Sherman and Clayton acts. What government
entities are responsible for enforcing those laws? Are firms permitted
to initiate antitrust suits on their own against other firms?
Get solution
18.3 Contrast
the outcomes of the Standard Oil and U.S. Steel cases. What was the
main antitrust issue in the DuPont cellophane case? In what major way do
the Microsoft and Standard Oil cases differ?
Get solution
18.4 Why
might one administration interpret and enforce the antitrust laws more
strictly than another? How might a change of administrations affect a
major monopoly case in progress?
Get solution
18.5 How would you expect antitrust authorities to react to:a. A proposed merger of Ford and General Motors.b. Evidence of secret meetings by contractors to rig bids for highway construction projects.c. A proposed merger of a large shoe manufacturer and a chain of retail shoe stores.d. A proposed merger of a small life-insurance company and a regional candy manufacturer.e. An automobile rental firm that charges higher rates for last-minute rentals than for rentals reserved weeks in advance.
Get solution
18.6 Suppose
a proposed merger of firms would simultaneously lessen competition and
reduce unit costs through economies of scale. Do you think such a merger
should be allowed?
Get solution
18.7 In
the 1980s, PepsiCo Inc., which then had 28 percent of the soft-drink
market, proposed to acquire the Seven-Up Company. Shortly thereafter,
the Coca-Cola Company, with 39 percent of the market, indicated it
wanted to acquire the Dr Pepper Company. Seven-Up and Dr Pepper each
controlled about 7 percent of the market. In your judgment, was the
government’s decision to block these mergers appropriate?
Get solution
18.8 Why
might a firm charged with violating the Clayton Act, Section 7, try
arguing that the products sold by the merged firms are in separate
markets? Why might a firm charged with violating Section 2 of the
Sherman Act try convincing the court that none of its behavior in
achieving and maintaining its monopoly was illegal?
Get solution
18.9 “The
social desirability of any particular firm should be judged not on the
basis of its market share but on the basis of its conduct and
performance.” Make a counterargument, referring to the monopoly model in
your statement
Get solution
18.10 What
types of industries, if any, should be subjected to industrial
regulation? What specific problems does industrial regulation entail?
Get solution
18.11 In
view of the problems involved in regulating natural Monopolies, compare
socially optimal (marginal-cost) pricing and fair-return pricing by
referring again to Figure 10.9. Assuming that a government subsidy might
be used to cover any loss resulting from marginal-cost pricing, which
pricing policy would you favor? Why? What problems might such a subsidy
entail?
Get solution
18.12 How
does social regulation differ from industrial regulation? What types of
benefits and costs are associated with social regulation?
Get solution
18.13 Use
economic analysis to explain why the optimal amount of product safety
may be less than the amount that would totally eliminate risks of
accidents and deaths. Use automobiles as an example.
Get solution
18.14 LAST WORD
Under what law and on what basis did the Federal district court find
Microsoft guilty of violating the antitrust laws? What was the initial
district court’s remedy? How did Microsoft fare with its appeal to the
court of appeals? Was the final remedy in the case a structural remedy
or a behavioral remedy?
Get solution
