Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill 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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- 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
- According to the Federal Trade Commission, “Many mergers benefit competition and consumers by allowing firms to operate more efficiently. But some mergers change market dynamics in ways that can lead to higher prices, fewer or lower-quality goods or services, or less innovation.” Antitrust laws often allow the former pro-competitive types of mergers, but prohibit the latter anti-competitive types. Suppose that one looks over the historical record of antitrust enforcement and finds that while the authorities have permitted some mergers and blocked others, the industry’s average price has tended to fall whenever a merger has been permitted and occurred. a) Based solely on the information provided above, is it correct then to infer that the antitrust authorities should have been more lenient and permitted more mergers? Why or why not? b) Based solely on the information in the question, is it likely that these merged firms sell products that are substitutes or complements? Whyarrow_forwardFrom 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_forward
- 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…arrow_forwardHow 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 lastminute rentals than for rentals reserved weeks in advancearrow_forwardQuestion C2 The Australian Competition and Consumer Commission (ACCC) has opened an investigation regarding collusion between the two major firms producing fire protection gear for bush firefighters. The firms - Azure Associates and Blue Guard - contend that they are quantity competitors and that the prices they are charging are a result of an increase in price by their suppliers. As part of the case, the ACCC has noted that the Australian firefighters typically purchase their own protective gear and are thus price takers in the market. Both the ACCC and the two firms under investigation agree that the market demand can be described by the inverse demand function: P(Q)=240-Q, where Q is the total quantity provided by the two firms (i.e., Q=q₁ + 9B, where is the 9A amount produced by Azure Associates and q, is the amount produced by Blue Guard). All parties also agree that the two firms have identical production technologies and that the two firms have the same constant marginal cost of…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_forwardAntitrust laws are designed to maintain a competitive market environment by a. eliminating monopolies wherever they exist b. preventing monopolies from generating negative externalities c. limiting practices that increase a firm’s market power d. imposing price ceilings on products produced by monopolies e. making charging a price above marginal cost illegalarrow_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_forward
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