Q17

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Atticus Finch
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Q17

by uhdang Thu May 14, 2015 8:20 pm

This question asks for the application of a term/concept from the passage: leverage.

Leverage is “the use of power in one market to reduce competition.”(50-52) And the first paragraph states that showing abuse of monopoly power involves, “using this monopoly power to exclude competition.” (12-13). So, leverage satisfies the element for being an abuse of monopoly power.

First of all, after skimming through answer choices, we can eliminate "No" choices. So let's eliminate A) and B). And then, let's go to the other choices.

C) According to the given description of leverage, leverage is something you can execute with the monopoly power and we are not given any other information about other means to generate leverage. Thinking this far, monopoly power does not always entail leverage and it is definitely not a characteristic of the monopoly power.

D) It's tempting, since competitive price is a fair price from market share competition. However, as far as what we've given from the passage, we don't know if it's okay to use leverage if the firm is setting a competitive price for it's product. There might be other elements that could be used to exclude other firms from competition besides the price. The passage illustrates this possibility with 'tying arrangement.'

E) This is it what we've discussed above supported by the passage. (Correct)
"Fun"