Why has one Presidential administration enforced the antitrust laws more or less strictly than another?
What will be an ideal response?
The answer is based on political philosophies about the market economy and the value of government intervention. Which perspective the administration adopts determines how harshly or loosely the laws will be enforced.
The active antitrust perspective views competition in the market as inadequate to achieve both allocation efficiency and fairness to consumers and producers. This perspective calls for government to strictly enforce the antitrust laws to prevent illegal tactics from being used, to stop anti competitive mergers, and to eliminate price fixing among firms. In this perspective, the government serves as a referee in the market to make sure that businesses play by the rules.
The alternative perspective is a laissez-faire one. It contends that competition should be considered over the long-term. Monopolization in an industry may be evidence that a firm has a superior product or innovation, but eventually the use of monopoly pricing and power creates incentives for other firms to compete and undercut the monopoly. The process of creative destruction as described by Joseph Schumpeter will eventually undermine the monopoly. This process will occur because of the emergence of new technology and products.
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If a regulatory commission sets the regulated price equal to marginal cost for a natural monopoly:
a. losses will result. b. government subsidies will be unnecessary. c. the firm will earn economic profits. d. new firms will want to enter. e. resource use will not be optimal.
A reduction in the number of farms in the United States has caused food production to fall
Indicate whether the statement is true or false