Managerial Economics and Business Strategy
Dr. David J. St. Clair Managerial Economics and Business Strategy
3551 #6 Answers – Summer 2012
1. What type of evidence did Dupont introduce in its plastic wrap trial that proved decisive in its acquittal? __ It brought in cross elasticities to show that there were many substitutes for plastic wrap. It then argued that the market had to be defined to include all substitutes. This broadened the definition of the market to the point where DuPont’s market share was small.___
2. What had Alcoa done that made the judge find it guilty of being a monopoly? _ It had a market share above 90%_. Did the judge rule that Alcoa was a “dirty” firm? _ No ___
3. Why did the verdict in the U.S. Steel antitrust case confuse everyone? __ U.S. Steel was ruled to be “reasonable” under the courts “Rule of Reason” doctrine. This was confusing because the company had a notorious reputation for price fixing and uncompetitive practices __
4. Bill Gates took a very aggressive approach to dealing with the Justice Department in the Microsoft case even though Microsoft had an “Alcoa Problem.” What was Microsoft’s “Alcoa Problem?” ___ Microsoft had a large market share approaching the 90% threshold established in the Alcoa case ___
5. When something is illegal “per se,” what does this mean? __ The government only has to prove that you did it; motive or intent does not matter ___
6. What was the remedy in the Standard oil and American Tobacco cases? __ divestiture (i.e., the companies were broken up) ____
7. What, according to Andrew Carnegie, was destructive competition? ___ excessive and ruthless competition among big firms that eliminated profits but not competitors __
8. When we were discussing oligopoly, we referred to the two faces of oligopoly. Which face of oligopoly was Carnegie referring to in his discussion of ‘destructive competition?’ the non-cooperative, extremely competitive rivalry _
9. What
3551 #6 Answers – Summer 2012
1. What type of evidence did Dupont introduce in its plastic wrap trial that proved decisive in its acquittal? __ It brought in cross elasticities to show that there were many substitutes for plastic wrap. It then argued that the market had to be defined to include all substitutes. This broadened the definition of the market to the point where DuPont’s market share was small.___
2. What had Alcoa done that made the judge find it guilty of being a monopoly? _ It had a market share above 90%_. Did the judge rule that Alcoa was a “dirty” firm? _ No ___
3. Why did the verdict in the U.S. Steel antitrust case confuse everyone? __ U.S. Steel was ruled to be “reasonable” under the courts “Rule of Reason” doctrine. This was confusing because the company had a notorious reputation for price fixing and uncompetitive practices __
4. Bill Gates took a very aggressive approach to dealing with the Justice Department in the Microsoft case even though Microsoft had an “Alcoa Problem.” What was Microsoft’s “Alcoa Problem?” ___ Microsoft had a large market share approaching the 90% threshold established in the Alcoa case ___
5. When something is illegal “per se,” what does this mean? __ The government only has to prove that you did it; motive or intent does not matter ___
6. What was the remedy in the Standard oil and American Tobacco cases? __ divestiture (i.e., the companies were broken up) ____
7. What, according to Andrew Carnegie, was destructive competition? ___ excessive and ruthless competition among big firms that eliminated profits but not competitors __
8. When we were discussing oligopoly, we referred to the two faces of oligopoly. Which face of oligopoly was Carnegie referring to in his discussion of ‘destructive competition?’ the non-cooperative, extremely competitive rivalry _
9. What