Purchase Solution

The Arena Company

Not what you're looking for?

Ask Custom Question

The Arena Company, which sells engines, has a uniform price of $500, which is charges all its customers. But, after its competitors begin to cut their prices in the California market to $400, Arena reduces its price to $400.

a. Does this tend to violate the Clayton Act?
b. If the Arena Company had cut its price to $300, might this tend to violate the Clayton Act?
c. Suppose Arena Company decides to purchase enough of the stock of competing firms so that it can exercise control over them and see to it that the price-cutting in the California market stops. Is this legal? If not what law does it violate?

2. The demand and supply curves for the Swiss franc are as follows:

Price of franc Franc demanded Franc supplied
(dollars) (millions) (millions)

0.80 600 800
0.70 640 740
0.60 680 680
0.50 720 620
0.40 760 560

a. What is the equilibrium rate of exchange for the dollar?
b. What is the equilibrium rate of exchange for the Swiss franc?
c. How many dollars are bought in the market?
d. How many Swiss franc are bought in the market?

Purchase this Solution

Solution Summary

The following posting helps answers questions regarding price cutting.

Solution Preview

1. The Arena Company, which sells engines, has a uniform price of $500, which is charges all its customers. But, after its competitors begin to cut their prices in the California market to $400, Arena reduces its price to $400.

a. Does this tend to violate the Clayton Act?

No, this doesnt violate Clayton Act as the firm is merely trying to keep up with the competition and elminate it.

b. If the Arena Company had cut its price ...

Solution provided by:
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
Recent Feedback
  • "Your explanation to the answers were very helpful."
  • "What does 1 and 0 means in the repair column?"
  • "Went through all of the formulas, excellent work! This really helped me!"
  • "try others as well please"
  • "Thank you, this helped a lot. I was not sure how to plug in those numbers to a formula. This was a great help. Now I have to figure out how to explain cost of capital is used in net present value analysis, and how cost of capital is used in net present value analysis. This stuff gets confusing."
Purchase this Solution


Free BrainMass Quizzes
Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.