#16 - Concept Reference, Must Be True, Author's Perspective

[Administrator]

Complete Question Explanation

The correct answer choice is (E).

Answer choice (A):

Answer choice (B):

Answer choice (C):

Answer choice (D):

Answer choice (E): This is the correct answer choice.


This explanation is still in progress. Please post any questions below!

[bk1111]

Hello: can someone please explain why E is the correct answer? I do not understand from where in the passage we can infer that "monopoly power does not necessarily" hurt consumer welfare?

[Adam Tyson]

Take a look at the example around line 36, bk1111, where a company with monopoly power might use that power to LOWER prices. That doesn't seem harmful to consumers, does it? Or around line 42, the hypothetical that begins with " If the antitrust laws posed disincentive" - that's suggesting that it would be harmful in some cases to take steps to PREVENT a company from getting monopoly power. That suggests pretty strongly that monopoly power may not be inherently harmful, absent any abuse of the power.

That passage is all about distinguishing the difference between HAVING monopoly power and ABUSING that power. The laws aim to prevent abuse, because that's where the harm comes in. If there is no abuse, there is not necessarily any harm. Check the last sentence, too, where the author tells us that antitrust laws focus on abuse, rather than on the mere existence of a monopoly, because they are intended to promote consumer welfare. The implication there is that monopoly power is not inherently harmful, for if it were, and the purpose of the law was to prevent such harm, then the laws WOULD also focus on their mere existence.

I hope that helps clear it up, bk!

[na02]

Is the answer not A because the stimulus doesn't mention "market control" and hence doesn't pass the Fact Test?

Many thanks!

[Robert Carroll]

na,

I don't see a discussion of market control, so that seems like a good way to get rid of answer choice (A).

Robert Carroll

[relona]

Take a look at the example around line 36, bk1111, where a company with monopoly power might use that power to LOWER prices. That doesn't seem harmful to consumers, does it? Or around line 42, the hypothetical that begins with " If the antitrust laws posed disincentive" - that's suggesting that it would be harmful in some cases to take steps to PREVENT a company from getting monopoly power. That suggests pretty strongly that monopoly power may not be inherently harmful, absent any abuse of the power.

That passage is all about distinguishing the difference between HAVING monopoly power and ABUSING that power. The laws aim to prevent abuse, because that's where the harm comes in. If there is no abuse, there is not necessarily any harm. Check the last sentence, too, where the author tells us that antitrust laws focus on abuse, rather than on the mere existence of a monopoly, because they are intended to promote consumer welfare. The implication there is that monopoly power is not inherently harmful, for if it were, and the purpose of the law was to prevent such harm, then the laws WOULD also focus on their mere existence.

I hope that helps clear it up, bk!

Wouldn't the evidence in the beginning of the third paragraph which talks about supra competitive prices' causing a loss in consumer welfare be evidence that monopoly power can hurt consumer welfare?

[evelineliu]

Hi Relona,

Paragraph 3 says that charging supra competitive prices doesn't by itself constitute an abuse of monopoly power.

Paragraph 5 talks about how antitrust laws focus on abuse of monopoly power. The reader can infer that the abuse of monopoly power is prohibited because it impairs consumer welfare but possession of monopoly doesn't necessarily hurt consumers.

Hope that helps!
Eveline