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Chapter 27: Q.10 (page 621)

Suppose that a business has developed a very high quality product and operates more efficiently in producing that product than any other potential competitor. As a consequence, at present it is the only seller of this product, for which there are few close substitutes. Is this firm in violation of U.S. antitrust laws? Explain.

Short Answer

Expert verified

This company is not breaking the Sherman Antitrust Act or any other antitrust laws in the United States.

Step by step solution

01

Introduction.

Antitrust laws, also known as competition act, are laws implemented by the US government to protect consumers from unfair business practices. They ensure that level playing field exists in an open market economy.

02

Given data.

Antitrust rules are not broken by a company that operates efficiently and effectively. If market domination is achieved through better operational operations and increased cost efficiency, the firm's conduct cannot be classified as monopolistic.

03

Explanation.

Using cost-effective technology, a company can lower the market price of its products. Other companies in the industry find it impossible to compete with this efficient company, and finally quit.

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Most popular questions from this chapter

Why do you suppose that the U.S. Transportation Department has been considering new regulations mandating that states construct parking facilities for trucks?

Do you think that the regulation described in Problem 27-6 is more likely an example of the capture hypothesis or the share-the-gains, share-the-pains theory? Why?

An years past, firms around the world have secretly engaged in collusive agreements to restrain production and push prices above competitive levels.

Evidence compiled by government officials investigating such agreements has revealed that conspiring firms often utilize similar methods of establishing and enforcing collusive restraints of trade. Most agreements, for instance, assign to each firm an allowed market share, a permitted region of operations, or an approved set of customers. In addition, participating firms commonly are required to exchange sales information so that they can monitor adherence to their agreements to restrain trade. In this chapter, you will learn why firms that typically utilize these techniques to formulate and maintain collusive agreements engage in secret conspiracies: Such agreements are illegal under U.S. antitrust laws.

Understand the foundations of antitrust regulations and enforcement

An years past, firms around the world have secretly engaged in collusive agreements to restrain production and push prices above competitive levels.

Evidence compiled by government officials investigating such agreements has revealed that conspiring firms often utilize similar methods of establishing and enforcing collusive restraints of trade. Most agreements, for instance, assign to each firm an allowed market share, a permitted region of operations, or an approved set of customers. In addition, participating firms commonly are required to exchange sales information so that they can monitor adherence to their agreements to restrain trade. In this chapter, you will learn why firms that typically utilize these techniques to formulate and maintain collusive agreements engage in secret conspiracies: Such agreements are illegal under U.S. antitrust laws.

Distinguish between economic regulation and social regulation

A package delivery company provides both overnight and second-day delivery services. It charges almost twice as much to deliver an overnight package to any world location as it does to deliver the same package to the same location in two days. Often, second-day packages arrive at company warehouses in destination cities by the next day, but drivers intentionally do not deliver these packages until the following day. What is this business practice called? Briefly summarize alternative perspectives concerning whether this activity should or should not be viewed as a form of price discrimination.
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