After a number of acquisitions, Air American controls 75 percent of the U.S.market.It has been charged with "monopolizing" the U.S.air markets by the Justice Department.In its defense, the airline would want to introduce evidence that
A)cross elasticities for air and rail travel were very high.
B)income elasticities for air and rail travel were very high.
C)price elasticity for air, rail, and auto travel were negative.
D)management always considered the public interest when setting prices.

Question

Quizplus · Accepted Answer

Cross elasticities for air and rail travel being high would indicate that consumers have substitutes for air travel and therefore Air American's market power is limited. This would be a strong argument in defense against the charge of monopolizing the U.S. air markets. Income elasticities and price elasticities are not relevant in this context, and the management's consideration of public interest is not a factor that would affect the charge of monopolization.

After a Number of Acquisitions, Air American Controls 75 Percent