Explain the behavioral and structural approaches to government antitrust policy. Identify one practical problem with each approach.
What will be an ideal response?
Two approaches to identifying potential antitrust violations are the behavioral and the structural approaches. The behavioral approach attempts to identify anticompetitive behavior by firms (e.g., coordination, predatory pricing, and price leadership). Practical problems associated with the behavioral approach include limited public sector funds to identify and prosecute offenders and difficulties in proving violations have taken place. The structural approach assumes that if a market is highly concentrated, antitrust violations have probably occurred-that is, firms with market power will act in their own best interests. Practical problems associated with the structural approach include the view that a firm should not be penalized just because it has been successful (without any evidence of wrongdoing) and the fact that the emphasis on existing market structure does not take into account potential competition (e.g., contestable markets and international competition).
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Grocery shoppers who willingly pay high prices at one supermarket to avoid long lines at the check-out counter of another supermarket with lower prices demonstrate, through their actions,
A) they are not rational shoppers. B) they don't care about money. C) they would pay any amount of money to save a little time. D) all of the above. E) none of the above.
Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good?
a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.