Perfect Competition Profit Maximization and Monopoly Merger Guidelines
In this Assignment, you will calculate the total cost, total revenue, and total profit/loss. Based on the computed results, you will determine the optimal quantity of output that maximizes profit under a perfectly competitive market. Moreover, you will evaluate the antitrust laws and merger guidelines based on the market shares of firms to prevent a monopoly and promote competition in the economy.
Instructions: This Assignment requires a combination of short paragraph answers and computations. Answer all of the following questions in this document. You are required to follow the proper APA format. Read the Criteria section below for more information before you begin this Assignment.
In this Assignment, you will be assessed on the following outcome:
GEL-7.02: Apply ethical reasoning to ethical issues within your field of study.
1. How does the demand curve faced by a perfectly competitive firm differ from the market demand curve in a perfectly competitive market? Explain.
2. How does the profit maximization condition for a monopoly differ from that for a perfectly competitive firm? How does this difference impact efficiency under each market structure? Explain.
3. The following table provides market share information about the soft-drink industry. Review antitrust laws and the merger guidelines under Chapter 15: “Monopoly and Antitrust Policy” and conduct your own research on U.S. antitrust laws in the Online Library or the internet to answer the following questions.
Company Market Share
Cadbury Schweppes 17%
a. Compute the Herfindahl-Hirschman Index (HHI) market concentration rules that guide mergers between companies to prevent monopoly creation and to promote competition among firms. Based on the market shares of the companies in the table, the merger of which companies will be highly concentrated? What ethical rules will be affected based on U.S. antitrust laws and merger guidelines in regard to a highly concentrated market?
b. Do you think the Department of Justice and the Federal Trade Commission would approve a merger between any two of the first three companies listed in the table based on U.S. merger guidelines and antitrust laws? Explain.
c. Do you think this market has barriers to entry? If yes, what might be the market barriers?
References (add references in APA format in the space below)
• This Assignment should be completed in this Word document.
• It should be written in Standard English and demonstrate exceptional content, organization, style, and grammar, and mechanics.
• Respond to the questions in a thorough manner, providing specific examples where asked.
• Your sources and content should follow proper APA format (A title page is not required). Review the APA formats found in the Writing Resources accessed through the Academic Success Center within the Academic Tools area of the course.
• Review the grading rubric to ensure all points have been captured in the paper. For more information on Competition Law check on this: https://en.wikipedia.org/wiki/Competition_law
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