Economics Study Guide
#12 1. Compare and contrast three policies used to correct the inefficiencies of monopolies(3)?
The first policy is competition. It can breaks up the monopoly and stop the behaviors of mergers. But in order to make the competition policy works, the market should be large enough to support.
The second one is the government policies towards natural monopoly. Nationalization(国有化), which is the government put fix marginal price to charge consumers, it prevents monopolists charging different prices. But it's inefficient because too many workers in the market.
c. The third one is private ownership with government regulation. It can stimulate competitive pricing. But it still cannot breakup the monopoly, because the market is not big enough.
2. Which laws and agencies authorize and enforce these policies(2)?
1) Sherman Anti-Trust Act 1890: It promotes competition and prevents the formation of monopolies.
Clayton Anti-Trust Act 1914: it prevent firms from buying stock in competitors and from having directors serve on the board of competing firms.
3) Federal Trade Commission: to help administer antitrust laws.
What is a Cartel (1)? Cartel is a group of firm that collude by agreeing to restrict output to increase prices and profits. Cartel members may agree on such matters as price fixing, total industry output, market shares, allocation of customers.
What problems must be solved by a cartel to be formed and to operate successfully(2)?
Members in Cartel want to restrict the quantity of output. But every individual firm wants to produce little more units of output to gain larger profits. Sooner or later, the fixed quantity of output will be breakup, the Cartel rules will be breakup.
b. Cartel wants to restrict at a fixed price. But every individual firm wants to cut back the price in order to obtain a larger market. As a result, the fixed price will be breakup and Cartel will be breakup.
The problem, those
The first policy is competition. It can breaks up the monopoly and stop the behaviors of mergers. But in order to make the competition policy works, the market should be large enough to support.
The second one is the government policies towards natural monopoly. Nationalization(国有化), which is the government put fix marginal price to charge consumers, it prevents monopolists charging different prices. But it's inefficient because too many workers in the market.
c. The third one is private ownership with government regulation. It can stimulate competitive pricing. But it still cannot breakup the monopoly, because the market is not big enough.
2. Which laws and agencies authorize and enforce these policies(2)?
1) Sherman Anti-Trust Act 1890: It promotes competition and prevents the formation of monopolies.
Clayton Anti-Trust Act 1914: it prevent firms from buying stock in competitors and from having directors serve on the board of competing firms.
3) Federal Trade Commission: to help administer antitrust laws.
What is a Cartel (1)? Cartel is a group of firm that collude by agreeing to restrict output to increase prices and profits. Cartel members may agree on such matters as price fixing, total industry output, market shares, allocation of customers.
What problems must be solved by a cartel to be formed and to operate successfully(2)?
Members in Cartel want to restrict the quantity of output. But every individual firm wants to produce little more units of output to gain larger profits. Sooner or later, the fixed quantity of output will be breakup, the Cartel rules will be breakup.
b. Cartel wants to restrict at a fixed price. But every individual firm wants to cut back the price in order to obtain a larger market. As a result, the fixed price will be breakup and Cartel will be breakup.
The problem, those