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Assume That Two Firms (Firm a and Firm B)operate in the U.S.steel

Question 105

Multiple Choice

Assume that two firms (Firm A and Firm B) operate in the U.S.steel industry.The owner of Firm A writes the following letter to the owner of Firm B:

Dear Owner of Firm B,
I have concluded that if we both restrict output such that we each produce only 3 million tons of steel per year,we can both charge a price that will allow us to effectively monopolize the steel market and to maximize our joint profits.If you would like to enter into this agreement with me,please draft a contract that specifies this agreement,and I will be more than willing to meet with you and sign it.
Sincerely,
Owner of Firm A
If this letter were sent in the year 1850,the owner(s) of


A) Firm A would be guilty of violating antitrust laws.
B) Firm B would be guilty of violating antitrust laws.
C) both Firm A and Firm B would be guilty of violating antitrust laws.
D) Firm B would be guilty of violating antitrust laws only if he drafted and signed the agreement.
E) both Firm A and Firm B would not be guilty of anything because there were no antitrust laws in existence in 1850.

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