In the 1980s, PepsiCo Inc., which then had 28 percent of the soft-drink market, proposed

Both antitrust policy and industrial regulation deal with monopoly. What distinguishes the two approaches? How does government decide to use one form of remedy rather than the other? LO21.1, LO21.3

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? LO21.1

Contrast the outcomes of the Standard Oil and U.S. Steel cases. What was the main antitrust issue in the DuPont cellophane case? In what major way do the Microsoft and Standard Oil cases differ? LO21.2

Why might one administration interpret and enforce the antitrust laws more strictly than another? How might a change of administrations affect a major monopoly case in progress? LO21.2

Suppose a proposed merger of firms would simultaneously lessen competition and reduce unit costs through economies of scale. Do you think such a merger should be allowed? LO21.2

In the 1980s, PepsiCo Inc., which then had 28 percent of the soft-drink market, proposed to acquire the Seven-Up Company. Shortly thereafter, the Coca-Cola Company, with 39 percent of the market, indicated it wanted to acquire the Dr Pepper Company. Seven-Up and Dr Pepper each controlled about 7 percent of the market. In your judgment, was the governments decision to block these mergers appropriate? LO21.2

Why might a firm charged with violating the Clayton Act, Section 7, try arguing that the products sold by the merged firms are in separate markets? Why might a firm charged with violating Section 2 of the Sherman Act try convincing the court that none of its behavior in achieving and maintaining its monopoly was illegal? LO21.2

The social desirability of any particular firm should be judged not on the basis of its market share but on the basis of its conduct and performance. Make a counterargument, referring to the monopoly model in your statement. LO21.2

What types of industries, if any, should be subjected to industrial regulation? What specific problems does industrial regulation entail? LO21.3

In view of the problems involved in regulating natural monopolies, compare socially optimal (marginal-cost) pricing and fair-return pricing by referring again to Figure 12.9. Assuming that a government subsidy might be used to cover any loss resulting from marginal-cost pricing, which pricing policy would you favor? Why? What problems might such a subsidy entail? LO21.3

How does social regulation differ from industrial regulation? What types of benefits and costs are associated with social regulation? LO21.4

Use economic analysis to explain why the optimal amount of product safety may be less than the amount that would totally eliminate the risk of accidents and deaths. Use automobiles as an example. LO21.4

last word On what basis were the airlines found guilty of violating antitrust laws in the Airline Tariff Publishing case? What was the remedy? By contrast, why might it be hard to prosecute algorithmic collusion, which also uses prices posted electronically?