Saved On 3 October 2006, the Federal Trade Commission (FTC) announced its tentative approval of merging Boeing and Lockheed Martin's space launch divisions to create the United Launch Alliance (ULA)... .-this decision in essence creates a single-source supplier for putting US satellites on orbit. In August 2006, Kenneth Krieg, head of acquisitions for the Pentagon, wrote to the FTC to support the proposed merger. He acknowledged that while it "will almost certainly have an adverse effect on competition, including higher prices over the long term, as well as a diminution in innovation and responsiveness," he still thought, "The national security advantages of ULA are paramount to the department's support of the transaction." Apparently, the FTC took his recommendation to heart. While the negotiations continue over ULA's division of labor between the two companies, the contracts have already begin. Boeing's Delta IV rocket division received a contract on 19 November 2006 worth US$674 million; this comes on the tail of a contract awarded to Lockheed Martin's Atlas rockets work US$815 million. Basic economic theory demonstrates that in monopolies, the prices of goods go up, while quantities go down. ULA has already shown it can flout the laws of common sense; let's hope it can do the same to the laws of economics. -Victoria Samson for Center for Defense Information (CDI) November 30, 2006 Source: ISN, ETH Zurich. < Prev 7 of 9 Next > DELL Commur X PortalGuard Single Sign-On Assignments: Microeconomics Chapter 10 HW wconnect.mheducation.com/flow/connect.html 10 HW 6 Saved Help Source: ISN, ETH Zurich. Analysis: Mergers eliminate duplicate facilities, thereby reducing total costs. But monopoly power permits the merged entity to the cost savings rather than pass them along to the consumer in the form of lower prices.The 2006 merger of Boeing and Lockh cut the costs of rocket production by $100-150 million a year. But the Defense Department ended up paying higher prices. The Department initially opposed the merger of the nation's only two satellite radio companies in 2007 for the same reason. Even th there were substantial short-run economies of scale in eliminating duplicate facilities, the Justice Department concluded that eve little competition (two firms) was better than none (a monopoly) in expanding consumer choice and keeping prices low. oped Instructions: Enter your responses as a whole number. Book (a) What was the annual cost saving for the rocket monopoly (in $ millions)? Print erences Between $ and $ million (b) How much of this saving did the FTC expect to be reflected in reduced rocket prices? %24 (c) According to economic theory, which is likely to be higher? The two-firm competitive price Neither, they will be equal The merged monopoly price Ac Graw < Prev 7 of 9 Next > duc otion DELL Ce