Which of the following business situation would be banned by the Sherman Anitrust Act?
A. A company invents a better product and charges higher price.
B. A company lowers the price of a product in order to gain market share.
C. A company buys up all competitors then raises prices.
D. A company uses a labor-saving technology to reduce production costs and makes more profit.
E. A company drives a competitors out of business by providing a better product at lower price.
The Sherman Antitrust Act is a U.S. federal law passed in 1890 that aims to prevent monopolies and promote fair competition in business. It prohibits activities that restrain trade or create monopolies. Let's analyze each business situation you've mentioned and determine which would be banned by the Sherman Antitrust Act:
A. A company invents a better product and charges a higher price.
This situation does not violate the Sherman Antitrust Act. Companies are generally allowed to charge higher prices for better products, as long as there is no monopoly or anti-competitive behavior involved.
B. A company lowers the price of a product to gain market share.
This situation does not violate the Sherman Antitrust Act either. In fact, price competition is generally seen as beneficial for consumers and encourages a competitive marketplace.
C. A company buys up all competitors and then raises prices.
This situation would likely be banned by the Sherman Antitrust Act. The act prohibits the acquisition of competitors if it leads to the creation of a monopoly or if it lessens competition in a relevant market.
D. A company uses labor-saving technology to reduce production costs and make more profit.
Using labor-saving technology to reduce costs and increase profit does not violate the Sherman Antitrust Act. It falls under the realm of normal business practices and does not restrict or restrain trade.
E. A company drives competitors out of business by providing a better product at a lower price.
This situation does not violate the Sherman Antitrust Act. Competition through better products and lower prices is generally encouraged by antitrust laws, as it benefits consumers by providing more choice and lower prices.
In conclusion, the business situation that would be banned by the Sherman Antitrust Act is C, where a company buys up all competitors and then raises prices, potentially leading to a monopoly or a significant reduction in competition.