AutoSave . Off H InadequateCompetitionAssignmentHandoutcc - Last saved by user - Co... - Saved O Casey, Caitlyn E CC X File Home Insert Draw Design Layout References Mailings Review View Help Share Comments The rule of reason is a set of antitrust laws which says a trade practice violated the Sherman act if the practice is an unreasonable restraint of trade. The per se rule is an activity that is specifically spelled out as a violation of the law. For example, fixing and rigging. 3. What law gives the government the power to prevent mergers that would significantly decrease competition in the market? The Clayton Anti-Trust Act Problems: 4. The following table shows the market shares of firms in three different industries. Industry # of Firms Market Shares HHI A 100 Each firm controls 1% 1 B 20 15 firms control 4% each; 5 firms control 8% each 80 5 2 firms control 30% each; 4 firms control 10% each 1000 a) Calculate the HHI for each industry. b) Will the Federal Trade Commission try to prevent a merger in Industry B? Industry C? Why? The FTC would try to prevent a merger in industry C because a merger would increase HHI above the generally accepted HHI for a merger. 5. Draw a graph of a typical natural monopoly with declining costs. a. Identify the area of deadweight loss when the monopoly chooses the profit-maximizing level of output. How will the area of deadweight loss be impacted with marginal cost pricing? What are the drawbacks to this approach? It can be used to find the inefficiencies b. On the graph, identify the price and quantity associated with fair-return pricing. What are the pros and cons of this type of regulation? Came near ard that it in likealu you will makes a normal profit And it in anual to the total Page 1 of 3 691 words Focus 89% O Type here to search em w N P O O ()) 8:19 PM 11/11/2020AutoSave File Home Insert Draw Design Layout References Rev ew View Help 6 Share 5 Comments people could earn money and try to make a living, reduced taxes, and long run ' employment rates and wage rates are higher. 6. The diagram below shows the cost and revenue curves for a ski lift to the top of Mount Everest. The price is the lift fee charged by the rm that operates the ski lift. The output is the number of passengers that use the lift each day. a. Assume that a private firm ownsthe ski lift and maximizes profits. Using the diagram, identify: i. Price 10 ii. Output (11 b. Now assume that the government regulates this enterprise and sets the price to achieve allocative efciency. Using the diagram, identify: i. Price 3 ii. Output (14 c. If the price was set at $8. is the rm's accounting profit positive, negative, or zero? Explain. Positive becausethe profit is above the AC. d. Suppose the government opted to set the price such that the firm would just cover all of its economic costs. Usingthe diagram, identify: v P3922 m3 691words In: Focus Fe 7 |o + 87% 0 Type here to search AutoSave . Off H InadequateCompetitionAssignmentHandoutcc - Last saved by user - Co... - Saved O Casey, Caitlyn E CC X File Home Insert Draw Design Layout References Mailings Review View Help Share Comments i. Price 4.5 ii. Output Q3 iii. At the output identified in part (ii), is demand elastic, inelastic, or unit elastic? How do you know? Elastic, greater price for less demand and quantity e. Suppose the LRATC remains downward sloping. From an economic efficiency standpoint, should a second ski lift be built? Explain. If the one bridge the demand is met, then we build the second bridge. The demand curve for bridge 1 will shift leftward, as well as the ATC will increase O Page 3 of 3 691 words [ Focus + 87% O Type here to search Hem 9 w N P 8:20 PM 11/11/2020
