Question

Monopoly power runs counter to the public interest because it leads to high prices, resource misallocation, and inefficiency. Antitrust policy is one of the government's instruments for curbing monopoly power and protecting competition.

Suppose that a major tire retailer purchases a major manufacturer's car tires at a discount on the condition that it must also purchase the manufacturer's truck tires. As a result of the agreement, several tire manufacturers lose their market shares and eventually exit the industry. This agreement would explicitly violate which of the following laws?

The Clayton Act of 1914

The Sherman Antitrust Act of 1890

The Robinson–Patman Act of 1936

The Celler–Kefauver Act of 1950

Answer 1

C. The Robinson–Patman Act of 1936

Step-by-step explanation:

The Robinson-Patman Act of 1936 is an amendment to The Clayton Act of 1914, which particularly prohibits price discrimination. Price Discrimination is an act in which distributors or sellers of certain goods, give discounts to people who they seem to benefit more from while smaller shops buy the goods at a costlier price.

The instance where the major tire manufacturer has an agreement to make a price discount with the manufacturer of truck tires is an example of price discrimination, and the consequence is that other markets are affected as they now exit the market. This is a clear contravention of the Robinson-Patman Act of 1936.