A successful cruise ship manufacturer begins buying all of the businesses that supply the materials and technology involved in cruise ship manufacturing. As the manufacturer grows in size, it is able to purchase smaller struggling firms until no competition remains. Being the only producer of cruise ships, it is now able to set higher prices with lower quantities supplied than previously existed in a competitive environment.

Question

A successful cruise ship manufacturer begins buying all of the businesses that supply the materials and technology involved in cruise ship manufacturing. As the manufacturer grows in size, it is able to purchase smaller struggling firms until no competition remains. Being the only producer of cruise ships, it is now able to set higher prices with lower quantities supplied than previously existed in a competitive environment.

Which of the following might the government employ to prevent this scenario from happening?

(1 point)
Responses

price floor
price floor

taxation
taxation

antitrust law
antitrust law

subsidies
subsidies
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Answer 1

The government might employ antitrust laws to prevent this scenario from happening. Antitrust laws are designed to promote competition and prevent monopolies by regulating the conduct of businesses and preventing anti-competitive practices. In this case, the government could use antitrust laws to prevent the cruise ship manufacturer from engaging in anti-competitive behavior such as buying up all its competitors and creating a monopoly in the industry.