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# Consider the following contract between a major tire manufacturer and a major tire retailer

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Consider the following contract between a major tire manufacturer and a major tire retailer

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1. The Sherman and Clayton Acts
Consider the following contract between a major tire manufacturer and a major tire retailer. The retailer purchases the manufacturer's car tires at a discount on the condition that it must also purchase the manufacturer's truck tires. As a result of the agreement, several tire manufacturers lose market share and eventually exit the industry. This agreement would explicitly violate the:
Sherman Act
Clayton Act

2. The Clayton and Celler-Kefauver Acts
Which of the following activities are prohibited by the Clayton Act when they lead to less competition?
A buyer is forced to buy multiple products from a producer in order to get a desired product.
A director from one business sits on the board of a competing firm.
A firm acquires a major percentage of the stocks of a competing firm.
Each of these answers is correct.

3. The Herfindahl index
Suppose that three firms make up the entire wig manufacturing industry. One has a 50% market share, and the other two have a 25% market share each.
The Herfindahl index of this industry is   .(3,750/5,000/10,000/2,500/1,000)
A new firm, Mane Attraction, enters the wig manufacturing industry and immediately captures a 15% share of the market. This would cause the Herfindahl index for the industry to   .(fall/remain the same/rise)
The largest possible value of the Herfindahl index is 10,000 because:
An index of 10,000 corresponds to a monopoly firm with 100% market share
An industry with an index higher than 10,000 is automatically regulated by the Justice Department
An index of 10,000 corresponds to 100 firms with a 1% market share each

4. 90-60-30, Herfindahl, and the FTC
Suppose that in the market for tires, market share is divided among six companies in the following manner:
Firm

Market Share

Michelin

82%

Goodyear

8%

Bridgestone

4%

Continental

3%

Yokohama

2%

Cooper Tires

1%

Based on the Herfindahl index of the market for tires, the FTC would   a merger between Goodyear and Yokohama. (encourage/challenge/not challenge)

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