Regulation and Antitrust Policy (Econ 180)
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I. Multiple Choice
(1)c. (2)a. (3)d. (4)b. (5)a. (6)a. (7)b. (8)b.
II. Problems
(1) [Motivations for vertical mergers: 16 pts]
(2) [Tying: 28 pts]
(3) [Monopoly extension with fixed proportion: 36 pts]
II. Critical Thinking
The effect of the merger on profit and social welfare depends on first, whether the merger increases in market power, and second, whether the merger creates cost savings. It seems unlikely that the merger would increase market power because both the grocery industry and agriculture are highly competitive markets with no firm having large market share. If the merger creates cost savings, then it will increase social welfare. If the merger does not create cost savings, it will have no effect on social welfare--but then the firms will have little incentive to merge.
I. Multiple Choice
(1)b. (2)c. (3)e. (4)a. (5)b. (6)c. (7)d. (8)a.
II. Problems
(1) [Motivations for vertical mergers: 16 pts]
(2) [Tying: 28 pts]
(3) [Monopoly extension with fixed proportion: 36 pts]
II. Critical Thinking
Same as Version A.
[end of answer key]