Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Chapter 12, Problem 7E
To determine
To Explain: The manner in which the price information was shared among the rival oligopolists when collusion among oligopolists has facilitated sharing of information and the reason that the court found these actions to be an antitrust violation. The U. S. Supreme Court interpreted the anti-trust law by reading the case summary of U.S v. U. S. Gypsum Co. et al. (438 U. S. 422), that is available in website www.stolaf.edu/people/becker/anitrust/summaries/438us422.htm.
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Students have asked these similar questions
Monopolists, unlike competitive firms, have some market power. A monopolist can increase price, within limits, without the quantity demanded falling
to zero. The main way it retains its market power is through barriers to entry-that is, other companies cannot enter the market to create competition
in that particular industry.
Complete the following table by indicating which barrier to entry appropriately explains why a monopoly exists in each scenario.
Barriers to Entry
Scenario
During most of the 1900s, the De Beers Group of South Africa was viewed as a
monopoly because it controlled a large percentage of diamond production and
sales.
In the natural gas industry, low average total costs are obtained only through
large-scale production. In other words, the initial cost of setting up all the
necessary pipes and hoses makes it risky and, most likely, unprofitable for
competitors to enter the market.
In an imaginary country, there is only one federally licensed lottery agency in
any…
A monopoly, unlike a perfectly competitive firm, has some market power. Thus, it can raise its price, within limits, without quantity demanded falling
to zero. The main way monopolies retain their market power is through barriers to entry, which prevent other companies from entering monopolized
markets and competing for customers.
Consider the market for taxi services. In order to own and operate a taxi, drivers are required to obtain a taxi medallion.
Which of the following best explains the barriers to entry that exist in this scenario?
Increasing returns to scale
Control over an important input
O Legal barriers
The Clayton Act of 1914 classifies several business practices as illegal, including price discrimination and tying contracts, if they "substantially lessen competition or tend to create a monopoly."
The Clayton Act of 1914 is an example of which of the following?
Price regulations or Antitrust laws
Chapter 12 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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