1. Which of the following business practices, if proven to exist, is always ille
ID: 1128952 • Letter: 1
Question
1. Which of the following business practices, if proven to exist, is always illegal under U.S. antitrust law
A. exclusive dealing
B. price fixing among competitors
C. tying arrangements
D. all of the above
2. In a cartel,
A. the firms' marginal cost equals the price set by the cartel.
B. each firm has an incentive to raise its price above the level set by the cartel.
C. each firm has an incentive to decrease its own production below the level set by the cartel.
D. each firm has an incentive to lower its price below the level set by the cartel.
3. Two firms, Alpha and Beta, produce identical computer hard drives. They have identical costs, and the hard drives they produce are identical. The industry is a natural duopoly. Alpha and Beta enter into a collusive agreement, according to which they split the market equally. If both firms comply with the agreement,
A. the oligopoly will produce more hard drives than a profit-maximizing monopoly would produce.
B. each firm will make zero economic profit.
C. together they will operate in a way indistinguishable from a monopoly.
D. the price of a hard drive will be equal to marginal cost.
A. the firms' marginal cost equals the price set by the cartel.
B. each firm has an incentive to raise its price above the level set by the cartel.
C. each firm has an incentive to decrease its own production below the level set by the cartel.
D. each firm has an incentive to lower its price below the level set by the cartel.
3. Two firms, Alpha and Beta, produce identical computer hard drives. They have identical costs, and the hard drives they produce are identical. The industry is a natural duopoly. Alpha and Beta enter into a collusive agreement, according to which they split the market equally. If both firms comply with the agreement,
A. the oligopoly will produce more hard drives than a profit-maximizing monopoly would produce.
B. each firm will make zero economic profit.
C. together they will operate in a way indistinguishable from a monopoly.
D. the price of a hard drive will be equal to marginal cost.
Explanation / Answer
1. Antitrust law is a law that applied to all industries, business in order to prevent the number of activities that restrains trade.
Exclusive dealing is illegal under the antitrust law.
Price fixing among the competitors is illegal under the antitrust law.
Tying arrangements are illegal under the antitrust law.
So, the correct answer is an option (D).
2. In a cartel, each firm has an incentive to decrease its price below the level set by the cartel.
So, the correct answer is an option (D).
3. If both firms come to an agreement and obey the rules of an agreement, according to which they have to split the market equally. Then the oligopoly will produce more hard drives than a profit-maximizing monopoly would produce.
So, the correct answer is an option (A).
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