Government subsidize domestic firms

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Answer ONE QUESTION from the three below using economic concepts to validate your explanations. Write one substantive paragraph for each question PART.

Q1 a) Why is an oligopolist more likely to be able to earn a profit in the long run compared to a monopolistic competitive firm? b) If all the firms in a monopolistically competitive industry were merged into one large firm, would that new firm produce as many different brands or would it produce only a single brand? Explain your reasoning.

Q2. a) To what extent should government subsidize domestic firms to enable them to compete more successfully with foreign rivals? b) Some political leaders argue that we should do away with certain antitrust laws to facilitate cooperation between firms in their competition with foreign rivals. How would you defend or criticize this reasoning using your knowledge of economics?

Q3. Evaluate the wisdom of having the Federal Trade Commission and Department of Justice using profit as a measure of monopoly power in deciding whether to prosecute a case. How would such a rule be expected to affect the behavior of firms with high profits? In what ways might any changes induced by such a rule be socially beneficial, and in what ways might they be socially harmful?

Reference no: EM131548343

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