U.S. antitrust statutes
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A.
Do the U.S. antitrust statutes protect competition or competitors? What is the difference?
B.
The Hair Stylist, Ltd., has a monopoly in the College Park market because of restrictive licensing requirements, and not because of superior operating efficiency. As a monopoly, the Hair Stylist provides all industry output. For simplicity, assume that the Hair Stylist operates a chain of salons and that each shop has an average cost-minimizing activity level of 750 hair stylings per month, with marginal cost = average total cost = $20 per styling.
Assume that demand and marginal revenue curves for hair stylings in the College Park market are:
P = $80 - $0.0008Q
MR = $80 - $0.0016Q
Where P is price per unit, MR is marginal revenue, and Q is total firm output (stylings).
1. Calculate the competitive market long-run equilibrium activity level, and the monopoly profit-maximizing price / output combination.
2. Calculate monopoly profits, and discuss the "monopoly problem" from a social perspective in this instance.
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Solution Summary
U.S. antitrust statutes are briefly evaluated.
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