Author Question: If a dominant firm is charged with refusal to deal under antitrust law, it is being charged because ... (Read 53 times)

Deast7027 · **on:** Jul 1, 2018

If a dominant firm is charged with refusal to deal under antitrust law, it is being charged because

A) the firm will not set its price at the regulated rate.
B) it is refusing to sell a key input to downstream rivals, thereby reducing or destroying competition.
C) it is refusing to cooperate with antitrust authorities, such as the Department of Justice.
D) it will sell its products only to people who agree to buy only from it and not from rival firms.

Question 2

When one automaker begins offering low cost financing or rebates, others tend to do the same. What two oligopoly models might offer an explanation of this behavior?

What will be an ideal response?

sarahccccc · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

B

Answer to Question 2

(1 ) Kinked demand curve: the assumption behind the kinked demand curve model is that rivals follow price decreases but not price increases. One automaker offering rebates, etc., is essentially a price cut, and so others will follow. (2 ) Price leadership: This could also be viewed as a price leader setting a new price and others following.