Principles of Economics- Mankiw (5th) 321

Principles of Economics- Mankiw (5th) 321 - The government...

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CHAPTER 15 MONOPOLY 331 ± By turning some private monopolies into public enterprises ± By doing nothing at all INCREASING COMPETITION WITH ANTITRUST LAWS If Coca-Cola and Pepsico wanted to merge, the deal would be closely examined by the federal government before it went into effect. The lawyers and economists in the Department of Justice might well decide that a merger between these two large soft drink companies would make the U.S. soft drink market substantially less competitive and, as a result, would reduce the economic well-being of the country as a whole. If so, the Justice Department would challenge the merger in court, and if the judge agreed, the two companies would not be allowed to merge. It is pre- cisely this kind of challenge that prevented software giant Microsoft from buying Intuit in 1994.
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Unformatted text preview: The government derives this power over private industry from the antitrust laws, a collection of statutes aimed at curbing monopoly power. The first and most important of these laws was the Sherman Antitrust Act, which Congress passed in 1890 to reduce the market power of the large and powerful trusts that were viewed as dominating the economy at the time. The Clayton Act, passed in 1914, strengthened the governments powers and authorized private lawsuits. As the U.S. Supreme Court once put it, the antitrust laws are a comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade. But if we do merge with Amalgamated, well have enough resources to fight the anti-trust violation caused by the merger....
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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