Managerial Economics and Business Strategy

Dr. David J. St. Clair Managerial Economics and Business Strategy 3551 6 Answers pass 2012 1. What type of evidence did Dupont introduce in its plastic wrap audition that proved decisive in its acquittal? __ It brought in cross elasticities to depict that there were many substitutes for plastic wrap. It then begd that the food grocery had to be delimitate to include all substitutes. This broadened the definition of the securities industry place to the point where DuPonts trade share was small. ___ 2. What had Alcoa done that made the figure find it guilty of cosmos a monopoly? It had a market share above 90%_. Did the judge rule that Alcoa was a dirty level? _ No ___ 3. why did the verdict in the U. S. Steel fair effort confuse e trulyone? __ U. S. Steel was govern to be commonsensical down the stairs the moves Rule of Reason doctrine. This was confusing be perplex the companion had a notorious reputation for expense fixing and un war-ridden practices __ 4. sco re Gates took a very aggressive approach to dealing with the legal expert Department in the Microsoft issue tied(p) though Microsoft had an Alcoa difficulty. What was Microsofts Alcoa Problem? ___ Microsoft had a large market share approaching the 90% door established in the Alcoa incident ___ 5. When something is culpable per se, what does this mean? __ The political relation exactly has to prove that you did it motive or intent does not matter ___ 6. What was the correct in the Standard oil and American Tobacco cases? __ divestiture (i. e. , the companies were broken up) ____ 7. What, match to Andrew Carnegie, was unhealthful ambition? ___ excessive and ruth little opposition among big menages that eliminated lucre 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 does the Hart-Scott-Rodino Act require? ___ pre- union presentment and approval by the Justice Department and the FTC ____ 10. What is a tying squelch (or accordance)? __ a firm refuses to seel crop that you want unless you also taint one of the firms other products ___ 11. The Sherman Act was con and sweet. It illegalize two things. Identify both a. ___being a monopoly ______________________ b. ___trying to become a monopoly __________________________ 2. Which antimonopoly act made vertical market foreclosure a violation of fair fairnesss? __ the Celler-Kefauver Act __ 13. What was the reason why the European Union blocked the conjugation of GE and Honeywell? __ It violated the EUs portfolio power doctrine __ 14. What is a soft loan? ___a government loan that is never going to be paid back a disguised subsidy __. Why flummox many American economists likened portfolio power to a soft loan? ___They argue that portfolio power is a disguised protectionist policy mas querading as an just policy___ 15. What was IBMs defense in its mainframe computer fair case? _ It challenged the governments take large main-frame computer definition of the relevant market ___ 16. What was DuPont convicted of in the GM case (be specific). ______ vertical market foreclosure ____ 17. What precedent did the Pabst bring in from raw material case set? __if the market is a local, then the relevant market must be local ____ 18. What precedent did the Staples/Office Depot case set? ___the Justice Department or the FTC can disallow a merger based on the anticipated price and competitive upshots ________________ 19. What happened to U. S. just policy following the E. C. Knight case? __ as a consequence of the E.C. Knight case, fair laws did not apply to manufacturing and there was a gesture of mergers in the manufacturing sector __ 20. In the 1890s, German courts were taking a very different approach to cartels and antitrust. What did the German court rule in the cornmeal mush cartel case? __ cartel agreements were legally enforceable contracts cartels were legal and socially beneficial ___ 21. What was brownness garb criminate of in the Kinney Shoe antitrust case? ____ vertical market foreclosure _____ 22. What was the remedy in the Brown Shoe/Kinney Shoe Case? ____ The merger was disallowed and the two firms were separated _______ 3. What does the firm take in to do in a apply decree? _ stop the off bar practices without admitting guilty _. What does the Justice Department agree to do in reach? ___ drops the case _ 24. Why do most firms prefer a consent decree to a trial, even when they feel that they are innocent? __ the case is quickly resolved and there is no conviction that can be used to expose the firm to civil cases seeking triple remedy __ 25. Are interlocking directorates illegal per se? Yes. Is price fixing illegal per se? Yes 26. Are tying contracts illegal per se? Yes Is price inconsistency illegal per se? _ No 7. How can the Justice Department and the FCC react to a notification of merger filed under the Hart-Scott-Rodino Act? (Hint they gravel cardinal options. ) __1) approve 2) deny or 3) approve with conditions __ 28. English Common law became the basis for American Common Law. What dos the Common Law maintain near damages for parties wound by restraint of trade? ___ injured parties are can collect triple damages ____ 29. Which type of snapshot is often important in antitrust cases? _ cross elasticity __ 30. Why did the Justice Department allege that Microsoft was using a tying agreement or contract? ___The Justice Department alleged that Microsoft was tying the MS-DOS in operation(p) system to the purchase of its browser ___ 31. Bill Gates was rather big-chested and combative in dealing with the Justice Department in the Microsoft case. He seemed unaware of Microsofts Alcoa problem. What was Microsofts Alcoa problem? _________This is a duplicate challenge see above____________ 32. How did IBMs mainframe computer antitrust suit end? ___ the Justice Department dropped the case because the court was marvellous to accept its nail down definition of the relevant market ____ 33.Why was Microsoft criminate of vertical market foreclosure? ___ Microsoft was accused of using its operation system monopoly (MS-DOS) to foreclose browser set upr from the market ___ 34. Why was Nabisco giving up on its strategy of seeking to create a cracker of biscuit monopoly? __It was unable to eliminate competition, especially the competition of capitals __ 35. Why was Nabisco so open in its 1901 annual report about discussing its efforts to monopolize the cracker (biscuit) industry? __Because of the E. C. Knight Case, there were no antitrust laws in 1901 that pertained to manufacturing firms _ 6. In its 1901 annual report, Nabisco announced that it was giving up on its efforts at creating a cracker or biscuit monopoly. What was the companys new strategy going to be? ____Nabisc o was going to concentrate on making better products and creating a more efficient and competitive firm ___ 37. What did Liggett accuse Brown & Williamson Tobacco of doing in its law suit? (dont simply say of being a monopoly or violating antitrust laws) ___Liggett accused Brown & Williamson of engaging in wolfish determine by change it cigatettes at below Brown & Williams AVC______ 8. Under the Areeda-Turner run, ravening set is defined as a firm selling its product at a price ____below its average variable cost_____ 39. Was the Areeda-Turner stress upheld (validated or confirmed) by the court in the Liggett vs. Brown & Williamsons case? ___No, the Areeda-Turner test was replaced by the recoupment test ___ 40. What must a plaintiff (the one who files the law suit) do (show) in order to keep a predatory pricing law suit from being dismissed (thrown out even before it goes to trial) under the recoupment test? ____The plaintiff must show that the defendant did have a reasonable chance of raising prices in the future to make up for, (that is, to recoup) its short term losses due to the low prices ___ 41. Does the recoupment test introduced in the Liggett vs. Brown & Williamson case make predatory pricing law suits more likely, less likely, or equally likely compared to the old Areeda-Turner test? ____less likely _____ 42. The courts have held that predatory pricing cases require a showing that a firm has reduced price below its costs. What is the relevant cost for this criterion? ________average varying cost (AVC) _________ 3. Many economists have used the concept of barriers to entry in their criticism of predatory pricing antitrust laws. Explain their criticism. __Predatory pricing scarcely makes sense if the firm can raise prices after using it to stumble a monopoly and if it has barriers to entry that can keep new competitors out. However, if it had such barriers in the first place, it would probably not need predatory pricing. Predatory pricing doe s not give the firm the required barriers to entry, unless one envisions constant predatory pricing. But constant predatory pricing is nothing more than price competition. ___ 44.During the thirties, large American behind companies faced competition from small hind end companies offering new brands at 10 cents per pack. How did they meet and deal with this competition? __They resorted to predatory pricing, i. e. , they dramatically reduced their prices (in some case to below costs) in order to drive the new competitors out of the market ___ 45. Did the response of the coarse Four tobacco companies to the challenge from the new 10-cent brands competitors in the early 1930s work? Why or why not? _the Four study were unable to drive out two competitors created by the 10-cent brand episode.They had a 91 percent market share before the episode and entirely a 69 percent market share after. Two terrible competitors emerged and the Big Four became the Big Six__ 46. What was the verdic t in the 10-cent brands cigarette case? _____the major cigarette companies were found guilty of violating the antitrust laws______ 47. Was predatory pricing the governments primary allegation against the majors in the 10-cent brands cigarette price wars? If not, what was the primary complaint? _the court focused primarily on the collusion among the majors to fix prices__ 48.What was the courts remedy in the 10-cent brands cigarette case? ___the court fined the guilty parties and restricted their ability to state and work together ____ 49. Why do most economists argue that antitrust laws prohibiting predatory pricing are actually anti-competitive? ____ Most economists argue that antitrust laws prohibiting predatory pricing are actually anti-competitive because any firm that lowers its prices to grapple against its market competitors are susceptible to being charged with predatory pricing, even when no such intent probably exists.Furthermore, filing an antitrust character related t o predatory pricing is often abused and a accessible way for businesses to compete with their competitors without matching their competitors price cutting especially since antitrust laws concerning predatory pricing are sometimes difficult to distinguish from predatory pricing, market competition, and competitive business practices. __ 50. Suppose there are quintuplet (5) firms in an industry with the following market shares 15%, 20%, 2%. 45%, and 18%. What is the Herfindahl Index for this industry? _______2,978_______. According to the 1992 Horizontal uniting Guidelines, how would this industry be classified? ___It would be classified as a highly concentrated market. _____ 51. Ceteris paribus, would a merger that raised the Herfindahl index from 1900 to 1941 be likely to trigger interest by antitrust regulators? Why or why not? ____No, because while this market would be classified as highly concentrated, the merger does not raise the HHI by more than 50 points and will therefore not trigger the interest of regulators. ___ 52. Ceteris paribus, would a merger that raised the Herfindahl index from 750 to 985 be likely to trigger interest by antitrust regulators? Why or why not? ___No, because a market with a Herfindahl Index below 1,000 is considered to be unconcentrated and mergers in unconcentrated markets are unlikely to be challenged by regulators. _____ 53. Tying contracts are illegal per se under American antitrust laws. However, enforcing their illegal per se status has proven to be very difficult.What is the problem here? ___While tying contracts are illegal per se under antitrust law, there seems to be no way of acquiring around some tying during the course of routine business, e. g. , left apparel tied to right shoes, etc. This therefore introduces the element of intent and competitive consequences two features that are not supposed to figure into illegal per se allegations. Currently, this problem is most pronounced in the practice of bundling in high tech markets. ____ 54.In the YouTube video on Monopoly, what did Milton Friedman think was the primary cause of longer-lasting monopolies? ____government market restrictions ___________ 55. In the YouTube video on Monopoly, what did Milton Friedman think was the very dress hat policy for dealing with monopolies and market power? ____free trade or measures to make trade more free and open _______ 56. In the YouTube video on Monopoly, Milton Friedman never mentioned or discussed Smiths Formula. However, based on his comments, what do think his position would have been on our 200-year old question? __Friedman would unquestionably argue that markets had, if government leaves them alone, sufficient competition to make Smiths Formula societys primary line of defense against monopoly abuse. __ 57. What happened when coca-Cola move to introduce its new soft swallow Peppo in the late mid-sixties? ____Dr Pepper sued for trademark infringement and Coka Cola had to change the name of the product to Mr Pibb. _____ 58. How did the FTC end up defining the relevant market in Coca Colas proposed acquisition of Dr Pepper? _The FTC took a very narrow view and defined the relevant market as the pepper-flavored soft drink market __. How did the FTC rule on the proposed acquisition? __The FTC denied the request for merger approval. __ 59. both(prenominal) the FTC and Coca Cola introduced Herfindahl Indexes in support of their positions in the proposed acquisition of Dr Pepper. What was the deprecative point on which the proposed merger was decided? ____The definition or stove of the relevant market ____