Economics and Antitrust
Paper Instructions
Q2. Chapter Three of Economics in Antitrust Policy discusses the theory of competition, which establishes the spectrum of markets between pure monopoly and pure competition. What are the five conditions for a perfectly competitive market, and define each of them. What is the branch of economics that deals with the study of markets? What particular academic paradigm does the branch use, or at least has used in the past to understand how markets work? (HINT: the paradigm is a three-part analysis). One of the structural conditions mentioned in the analysis are barriers to entry in a market; what is a entry barrier according to economist Joe Bain? What technological features of markets does he identify as entry barriers? What does Chapter Four of Armentano suggest are barriers to entry in a market? Though some of the examples of entry barriers are assumed to be exogenous (in other words, taken as given and unable to be influenced by the firms in the market) when firms are able to commit to actions that will make potential entrants less likely to enter into a market, how do firms decide to engage in such behaviors? Finally, from the discussion in Chapter Three of the Armentano text, in what two fundamental ways do monopolies misallocate resources? Please define these two misallocation types.
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