In the Wall Street Journal article “Whiting Petroleum Becomes First Major Shale Bankruptcy as Oil Prices Drop,” Whiting Petroleum, an oil and gas driller in the perfectly competitive oil and gas market, posted enormous losses due to, among other things, a decrease in the demand for oil caused by the coronavirus which, in turn, has caused oil prices to collapse. Since Whiting Petroleum is losing money but staying in business (which Chapter 11 allows), what must be true about the new price?

 

• a. The new price is above the minimum of the average total cost

• b. The new price is above the marginal revenue

• c. The new price represents a long-run equilibrium price level

• d. The new price is above the minimum of average variable cost

 

The article entitled “T-Mobile, Sprint Deal Wins Approval, Reshaping Industry” (published in the Wall Street Journal) reported that the Court approved the merger between T-Mobile and Spirit a decision supported by the U.S. Department of Justice. What best reflects the Court’s and the Department of Justice’s support of the merger

 

a. while the merger increased the Herfindahl-Hirschman-index number in the wireless market, the merger also increased the level of competition in the wireless market

b. while the merger increased the Herfindahl-Hirschman-index number in the wireless market, the likelihood of cartel like conduct (e.g., price fixing) by ATT, Verizon and the combined T-Mobile and Spirit increased

c. while the merger decreased the level of competition in the wireless market, it increased the relevant Herfindahl-Hirschman-index number (in the wireless market.)

d. while the merger decreased the Herfindahl-Hirschman-index number in the wireless market, the likelihood of cartel like conduct (e.g., price fixing) by ATT, Verizon and the combined T-Mobile and Spirit decreased