1. Dumping and predatory pricing involve selling at very low prices, even below cost, for the purpose of driving competitors out of business. If a firm were to succeed it would be a monopoly and could raise prices accordingly. Unfortunately, most economists have failed to observe any situations such as this. Why would a predatory monopoly have difficulty driving out competitors, raising prices, and sustaining economic profits in the long-run in a market that was previously monopolistic on a global scale? Is there any particular feature of purely competitive or monopolistically competitive markets that suggests there is no basis for anti-trust laws within these markets?
2. When free trade increases market competition, what happens to the ability of a firm to set high prices? What about when trade restrictions are imposed?
3. If free trade increases a domestic firms access to the global market place such that it can double all factors of production and realize a threefold increase in output, what happens to its average unit costs and its ability to compete in the global market place? Explain.
4. If the U.S. and Japan trade different versions of cars and the U.S. enacts trade barriers against Japanese car imports, what will happen to the level of Japan's horizontal foreign direct investment in the U.S.? Why?
5. What is intra-industry trade and how is it effected by economies of scale, differentiated products, and vertical foreign direct investment? Explain.
6. If several different sovereign nations form a cartel within the energy industry such that the four-firm concentration ratio is 0.90, does the concentration ratio necessarily represent the relevant market and should this be considered a violation of the anti-trust laws of sovereign nations that are not part of the cartel? Are there any market forces that will eventually cause the cartel to collapse?
7. If free trade and greater foreign competition causes markets that were previously oligopolistic to become monopolistic, is this good for the consumer? Is free trade and competition better for any workers unions that may have existed within the previously oligopolistic industry?