Microeconomics
11th Edition
ISBN: 9781260507041
Author: Colander, David
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 15, Problem 5QAP
(a)
To determine
The reason why mergers occur if they are not especially profitable.
(b)
To determine
Explain the new policy of government on merging.
(c)
To determine
The best antitrust policy that is apt for today’s economy.
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Students have asked these similar questions
Part 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?
U.S. antitrust laws are designed to prohibit monopolization and encourage competition. Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?
Is the following statement correct? "The antitrust laws in reality deal less with monopolies than with oligopolies."
Chapter 15 Solutions
Microeconomics
Ch. 15.1 - Prob. 1QCh. 15.1 - Prob. 2QCh. 15.1 - Prob. 3QCh. 15.1 - Prob. 4QCh. 15.1 - Prob. 5QCh. 15.1 - Prob. 6QCh. 15.1 - Prob. 7QCh. 15.1 - Prob. 8QCh. 15.1 - Prob. 9QCh. 15.1 - Prob. 10Q
Ch. 15 - Prob. 1QECh. 15 - Prob. 2QECh. 15 - Prob. 3QECh. 15 - Prob. 4QECh. 15 - Prob. 5QECh. 15 - Prob. 6QECh. 15 - Prob. 7QECh. 15 - Prob. 8QECh. 15 - Prob. 9QECh. 15 - Prob. 10QECh. 15 - Prob. 11QECh. 15 - Prob. 12QECh. 15 - Prob. 13QECh. 15 - Prob. 14QECh. 15 - Prob. 15QECh. 15 - Prob. 16QECh. 15 - Prob. 17QECh. 15 - Prob. 18QECh. 15 - Prob. 1QAPCh. 15 - Prob. 2QAPCh. 15 - Prob. 3QAPCh. 15 - Prob. 4QAPCh. 15 - Prob. 5QAPCh. 15 - Prob. 1IPCh. 15 - Prob. 2IPCh. 15 - Prob. 3IPCh. 15 - Prob. 4IPCh. 15 - Prob. 5IPCh. 15 - Prob. 6IPCh. 15 - Prob. 7IP
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Similar questions
- Why 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_forwardIn the article by Michael Baye and Joshua Wright (“Is Antitrust Too Complicated forGeneralist Judges?”), describe how they measure the economic complexity of antitrustcases. What as the modal level of complexity? How would you describe the complexitydistribution?arrow_forwardHow antitrust policy and industrial organization is related?arrow_forward
- From the perspective of consumers and society overall, monopolies are worse than perfectly competitive markets. This is the major reason behind the existence of US antitrust laws. Describe a situation, however, where monopolies are good for consumers and why. (Hints: Is perfect competition always the right comparison? What kinds of costs typically lead to industries where a monopoly may benefit consumers?)arrow_forwardDetermine whether each of the statements regarding the regulation of mergers in the United States is true or false by dragging the true and false labels into the correct bins The Department of Justice and the Federal Trade Commission are Answer Bank responsible for approving mergers and enforcing antitrust law false true Market definition is one of the main parts of current merger guidelines. The Federal Reserve oversees the enforcement of antitrust law Measure of concentration is one of the main parts of current merger guidelines. Mergers that result in a relatively high HHI are less likely to be approved than mergers resulting in a lower HHI. Firm diversification is one of the main parts of the current merger guidelinesarrow_forwardMerger 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…arrow_forward
- Our textbook discusses two methods of regulating natural monopolies. One of them is price cap regulation. One of the following answers is an example of price cap regulation. Which one? Group of answer choices A government setting the price that a cable company can charge over a period of time by looking at the cable company's accounting costs and then adding a normal rate of profit. A government setting a price level for a public utility several years in advance. When a regulated public utility plays a large role in setting up the regulations that they will follow. When a firm no longer is considered a natural monopoly because of decreased demand.arrow_forwardThe antitrust law aim to a. Facilitate operation among firms in oligopolistic industries b. Encourage mergers to take advantage of economies of scale c. Discourage firms from moving production facilities overseas d. Prevent firms from acting in ways that reduce comparrow_forwardAnswer 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_forward
- PRICE (Dollars per can) 2.00 1.80 1.60 Demand 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0 0 MC = ATC MR 90 180 270 360 450 540 630 720 810 900 QUANTITY (Cans of beer) Monopoly Outcome $0.80 per can. Given this When they act as a profit-maximizing cartel, each company will produce 180 cans and charge information, each firm earns a daily profit of $144.00, so the daily total industry profit in the beer market is $288.00. Oligopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit in the market. Again, assume the two companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit. Now, suppose that Stargell decides to break the collusion and increase its output by 50%, while Schmidt continues to produce the amount set under the collusive agreement. Stargell's deviation from the collusive agreement causes the price of a can of beer to now $ , while Schmidt's…arrow_forwardWe have learned the definition of monopoly as a market with one seller. Let's take some time to understand what that means, and how it can come about. What are some of the reasons that a market could be a monopoly? What is giving the monopolist their exclusive position in the market? Everyone should discuss a few reasons and/or examples of how a monopoly can come into existence. Typically the model of Monopoly predicts that all customers are charged the same price and that the monopolist selects the quantity and price combination from the market demand curve that maximizes profit. However, there are times where a monopolist may at least attempt to charge different prices for the exact same product depending on each consumer's willingness and ability to pay. In this case the monopolist might offer the product at a lower price to those who would otherwise not buy it, thus increasing quantity consumed in the market and reducing some of what is called the dead weight loss of monopoly.…arrow_forward
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