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Question
Assume that two firms (Firm A and Firm B) operate in the U.S. steel industry. The owner of Firm A writes the following letter to the owner of Firm B:
Dear Owner of Firm B,
I have concluded that if we both restrict output such that we each produce only 3 million tons of steel per year, we can both charge a price that will allow us to effectively monopolize the steel market and to maximize our joint profits. If you would like to enter into this agreement with me, please draft a contract that specifies this agreement and I will be more than willing to meet with you and sign it.
Sincerely,
Owner of Firm A
If this letter were sent in the year 1944, the
a. owner of Firm A would be guilty of violating antitrust laws because he or she merely attempted to monopolize the steel industry.
b. owner of Firm A would be guilty of violating antitrust laws only if he or she met with the owner of Firm B and signed the contract, but the owner of Firm A would be not guilty if the attempt to monopolize the market failed because the owner of Firm B never responded to the letter.
c. owners of both Firm A and Firm B would not be guilty of violating antitrust laws because antitrust laws in 1944 applied only to industries made up of three or more firms.
d. owners of both Firm A and Firm B would not be guilty of violating antitrust laws because antitrust laws in 1944 contained exceptions for certain nationally important industries like the steel industry.
e. owners of both Firm A and Firm B would not be guilty of anything because there were no antitrust laws in existence in 1944.
Answer
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