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18e Key Question Answer

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18e Key Question Answer
18-2 (Key Question) Describe the major provisions of the Sherman and Clayton acts. What government entities are responsible for enforcing those laws? Are firms permitted to initiate antitrust suits on their own against other firms? Sherman Act: Section 1 prohibits conspiracies to restrain trade; Section 2 outlaws monopolization. Clayton Act (as amended by Celler-Kefauver Act of 1950): Section 2 outlaws price discrimination; Section 3 forbids tying contracts; Section 7 prohibits mergers which substantially lessen competition; Section 8 prohibits interlocking directorates. The acts are enforced by the Department of Justice, Federal Trade Commission, and state attorneys general. Private firms can bring suit against other firms under these laws.
18-5 (Key Question) How would you expect antitrust authorities to react to (a) a proposed merger of Ford and General Motors; (b) evidence of secret meetings by contractors to rig bids for highway construction projects; (c) a proposed merger of a large shoe manufacturer and a chain of retail shoe stores; (d) a proposed merger of a small life insurance company and a regional candy manufacturer; and (e) an automobile rental firm that charges higher rates for last-minute rentals than for rentals reserved weeks in advance. (a) They would block this horizontal merger (violation of Section 7 of the Clayton Act). (b) They would charge these firms with price fixing (violation of Section 1 of the Sherman Act). (c) They would allow this vertical merger, unless both firms had very large market shares and the resultant merger substantially lessens competition. (d) They would allow this conglomerate merger. (e) They would not interfere with this price discrimination.
18-10 (Key Question) What types of industries, if any, should be subjected to industrial regulation? What specific problems does industrial regulation entail? Industries composed of firms with natural monopolies conditions are most likely
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