A joint venture leads to increases in national welfare if its cost-reduction effect is due to productivity gains and if it more than offsets the market-power effect.

Question

Quizplus · Accepted Answer

This statement is a valid proposition on the conditions under which a joint venture can lead to increases in national welfare. If the cost-reduction effect is due to productivity gains (e.g., through the sharing of technology, research and development, or economies of scale), and if it more than offsets the market-power effect (e.g., by increasing competition, lowering prices, or improving quality), then a joint venture can improve economic efficiency and welfare. However, if the cost-reduction effect is due to collusion or other anticompetitive behaviors, or if the market-power effect dominates, then a joint venture can harm consumers and the economy.

A Joint Venture Leads to Increases in National Welfare If