Assume That Two Firms (Firm a and Firm B)operate in the U.S.steel

question 169

Multiple Choice

Assume that two firms (Firm A and Firm B) operate in the U.S.steel industry.The owner of Firm A writes the following letter to the owner of Firm B:
Dear Owner of Firm B,
I have concluded that if we both restrict output such that we each produce only 3 million tons of steel per year,we can both charge a price that will allow us to effectively monopolize the steel market and to maximize our joint profits.If you would like to enter into this agreement with me,please draft a contract that specifies this agreement and I will be more than willing to meet with you and sign it.
Sincerely,
Owner of Firm A
If this letter were sent in the year 1944,the

• A) owner of Firm A would be guilty of violating antitrust laws because he or she merely attempted to monopolize the steel industry.
• B) owner of Firm A would be guilty of violating antitrust laws only if he or she met with the owner of Firm B and signed the contract,but the owner of Firm A would be not guilty if the attempt to monopolize the market failed because the owner of Firm B never responded to the letter.
• C) owners of both Firm A and Firm B would not be guilty of violating antitrust laws because antitrust laws in 1944 applied only to industries made up of three or more firms.
• D) owners of both Firm A and Firm B would not be guilty of violating antitrust laws because antitrust laws in 1944 contained exceptions for certain nationally important industries like the steel industry.
• E) owners of both Firm A and Firm B would not be guilty of anything because there were no antitrust laws in existence in 1944.

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Definitions:

Barriers To Entry

Barriers to entry are obstacles that make it difficult for new competitors to enter a market, including high costs, strict regulations, and established brand loyalty.

Market Price

The current price at which an asset or service can be bought or sold in the open market.

Price Discrimination

A pricing strategy where identical or substantially similar products or services are sold at different prices by the same provider in different markets.

Senior Citizen Discounts

Price reductions or special offers given to elderly consumers, typically those aged 65 and older, as a form of financial relief or incentive.