A firm can be expressly prohibited from engaging in certain business activities or can be broken into two or more competing firms when it

Question

BlackTom AI · Accepted Answer

Consider the statement presented and evaluate each option in light of antitrust and competition policy concepts.
Option 1: 'is getting too profitable.' While high profitability can draw scrutiny, antitrust enforcement is not triggered merely by profitability. Profits alone do not determine illegality; the key issue is whether the firm engages in illegal anticompetitive behavior or-market power abuse. This makes the option misleading as a standalone basis for prohibiting activities.
Option 2: 'is not very competitive.' A lack of competition can be a concern, but antitrust action typically hinges on specific conduct (such as price fixing, market division, or abusive practices) or structural remedies when market power is misused. Merely being less competitive does not automatically justify prohibiting activities unless accompanied by illegal behavior or proven harm to competition. Thus this option is incomplete as a general rule.
Option 3: 'is found guilty of monopoly abuse.' This aligns with core antitrust mechanisms. If a firm abuses monopoly power—through practices like predatory pricing, exclusive dealing to foreclose rivals, or coercive tying—it can be prohibited or, in extreme cases, lead to remedies including breakup to restore competition. This option accurately reflects a common basis for government action.
Option 4: 'is found innocent of antitrust.' Being found innocent would not trigger prohibitions or divestitures; in fact, it would imply no illegal conduct was established. Therefore, this option is incorrect as a general rule for restricting or dissolving a firm.
Summing up, the reasoning shows that profitability, generic lack of competitiveness, or innocence do not themselves justify prohibiting activities; only proven monopoly abuse refers to unlawful conduct that warrants such actions.

A firm can be expressly prohibited from engaging in certain business activities or can be broken into two or more competing firms when it

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