Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 13, Problem 5.1P
To determine
Anti-trust laws.
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Merger of beer giants faces obstacles
Mega-brand beers have lost market share to wine and craft beer. In response, Anheuser-Busch InBev and SABMiller, the two biggest brewers in the world, are discussing a merger that would be scrutinized by antitrust regulators.
Source: The New York Times, September 16, 2015
How would a merger benefit the two big brewers? Under what circumstances would the Federal Trade Commission (FTC) challenge the merger?
A merger would benefit the two big brewers because
O A. the price of beer would fall close to the price in a perfectly competitive market and sales would increase
O B. average total cost would increase but price would increase by more than average total cost
O C. the price of beer could rise close to the monopoly price and economic profit would increase
O D. many craft brewers would be forced out of the market
The Federal Trade Commission would challenge the merger if
O A. it increases the HHI
O B. the HHI is less than 1,500
O C. the HHI is…
Read “YOU’RE THE ECONOMIST: The Standard Oil Monopoly” in Chapter 9. If Standard Oil was a natural monopoly, what would happen to the average cost of producing gasoline after the company was split up? Explain using an LRAC curve.
20
Chapter 13 Solutions
Principles of Economics (12th Edition)
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- Answer the given question with a proper explanation and step-by-step solution. Why is it important for the United States to have laws such as the Sherman Antitrust Act and the Clayton Antitrust Act? Can you describe corporations today that are taking such a large part of market share that it's difficult for smaller companies to enter the market?arrow_forwardPart 1. Suppose that you overhear a foursome of physicians on the golf course discussing the prices they charge for an office visit. Suppose further that you hear them reach an agreement to all charge a fee of $ 100 for an office visit. What is such an agreement called in antitrust policy, and what antitrust law may have been violated? Part 2. Suppose that emergency room services in the city of Frederiksberg are provided by three hospitals. Two of the hospitals each have a market share of 40% and the third hospital has a market share of 20%. The two largest hospitals plan to merge. Compute the pre-merger and post -merger HHI for this market. Based on the hospital merger guidelines, would this merger likely be challenged by the antitrust authorities?arrow_forward5arrow_forward
- Please watch the following TED Talk titled “The new age of corporate monopolies”:https://www.youtube.com/watch?v=yNhu0MG_2MA. Please explain why competition isimportant in the market. Type your answers and submit them to Blackboard (Maximum: 300words).arrow_forwardMacmillan Learning (Figure: Pay Per View Movies on Xfinity Cable) Use Figure: Pay Per View Movies on Xfinity Cable. The figure shows the demand and marginal revenue curves for on-demand movie rentals on Xfinity. Assume that marginal cost and average cost are constant at $20. If the cable company has market power, what price will it charge? Price, Costs, Marginal Revenue $100 90 80 70 60 50 40 30 20 10 1 2 3 MR 4 5 6 7 8 9 DO Darrow_forwardQuestion 20 How would a profit-maximizing monopoly decide where to produce? Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer. a It will produce where marginal revenue is greater than marginal cost. b It will produce where marginal cost equals demand. C It will produce where average cost equals marginal revenue. d it will produce where marginal cost equals marginal revenue. Question 21 The following table is missing critical information. What is the economic profit or loss at 3 units of quantity?arrow_forward
- Many firms that sell in small markets are effectively monopolies; they are the sole provider of a good in their geographic area. Most of these firms earn positive economic profits, yet they are allowed to operate as monopolies without regulation by government. Why?arrow_forwardTable 17-4 Only two firms, ABC and MNO, sell a particular product. The following table shows the demand curve for their product. Each firm has the same constant marginal cost of $4 and zero fixed cost. Price (Dollars per unit) 14 13 12 11 11 10 9 8 7 7 6 5 5 A 4 3 2 2 1 0 Quantity Demanded Total Revenue (Dollars) 0 65 120 QUESTION 9 (Units) 0 5 10 15 20 20 25 30 35 40 45 50 55 60 65 70 165 200 200 225 240 245 240 225 200 165 120 65 0 Refer to Table 17-4. If ABC and MNO operate to jointly maximize profits and agree to share the profit equally, then how much profit will each of them earn? O a. $125.00 O b. $62.50 O c. $225.00 O d. $24.00arrow_forward4.arrow_forward
- 6arrow_forwardWhy do the United States and many other countries have antitrust laws? What’s so harmful about oligopoly that it warrants an entire body of law?arrow_forwardFrom our textbook and in your own words, define what a monopoly is. In your response, address the following: What are some disadvantages and advantages of a monopoly compared to brand competition? Is there a trend toward consolidation in some markets, and if so, what does that mean to you, the consumer? What is better for you, the consumer, monopoly, or brand competition? Please use current research in your response. Here are some ideas that might help you get started. Ninety-two percent of the prescription drugs sold in the United States come from just three wholesalers. Coke owns over 200 brands, including names like Schweppes, Dr. Pepper, Fanta, and Powerade. Nestle owns over 2,000 brands. Hospital consolidation has.arrow_forward
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