Questions 1. Dominant Firm Conduct (8 points each) a. Assume that the pizza business in Austin is highly competitive, and that it consists of many small sellers of pizza. One particular pizza place, Austin's Pizza, has announced a deal in which Austin's will give away a can of coke for each pizza purchased. Is Austin's Pizza guilty of predatory pricing? Explain, using no more than one double-spaced page. . What cost test was set out in Brooke Group? Explain. . Under what conditions is the cost concept that was set out in Brooke Group approximately equal to marginal cost? Explain. . Suppose that you are an analyst for a consulting firm that has been retained to work on a predatory pricing case. The defendant sells chert and flint arrowheads. The lawsuit alleges that the defendant prices cherts below cost. The defendant's variable cost for a chert arrowhead is $1.00 per unit. Its overheard costs are substantial, and must be recovered somehow in the prices of cherts and flints. You have data on the number of employees solely engaged in producing chert arrowheads and nothing else, and you have data on the number of employees solely engaged in producing flint arrowheads and nothing else. You also have information on the relative sales of flint and chert arrowheads. Your analysis is to be governed by Brooke Group. How would you allocate the relevant overhead costs to chert for the purpose of coming up with a cost number to compare to the defendant's price of a chert arrowhead? Explain. . You are a lawyer working with a client that believes that it has been injured by Domino's pricing its pizza below average variable cost. You notice that the cost of entry into the pizza business does not seem to be high. Assuming that Domino's is indeed pricing pizza below average variable cost, would a predatory pricing lawsuit be likely to succeed? Explain