Need help solving this problem..please answer all parts..Thanks! In 1983: the U.
ID: 2506101 • Letter: N
Question
Need help solving this problem..please answer all parts..Thanks!
In 1983: the U.S. Justice Department agreed to drop a consent decree that it had extracted from Safeway (a big grocery store chain) in the 1950s. Please look up the meaning of a "consent decree':. Background: Years ago: the consent decree prohibited Safeway from selling its goods at "prices below the cost" of acquiring grocery products or at "unreasonably low prices" that might be below cost. The decree stemmed from a government suit that had accused Safeway of selling below cost in an effort to monopolize the market for retail food in Texas and New Mexico. In other words, the Justice Department, through the consent decree, wanted Safeway to sell at prices that are above costs. How likely is it that Safeway or anyone else would be able to monopolize the market for retail food in two states when prices are below costs? The alleged attempt to monopolize led Safeway to reduce prices to customers. Who do you suppose complained to the Justice Department about Safeway's behavior? Do you think that years ago Safeway fought the US Department of Justice against the consent decree?Explanation / Answer
1
Safeway or anyone else can EASILY monopolize the market for retail food by keeping the price below costs. This is because consumers are very price conscious. They will buy goods from the cheapest source. And, by selling goods at a price below cost, there will be no rivals with similar price to reduce their sales. Eventually, the competitors would incur losses and shut down their business. This will ultimately lead to a monopoly by Safeway.
2
The customers would be very happy by this move, which will not make them complain. The competitors have complained to the Justice Department as it is finding itself in an uncomfortable place by the loss making pricing policy of Safeway making them impossible to compete with.
3
Safeway must have fought Justice Department on 2 frontiers
a. There pricing policy is there internal matter and nobody should have the right to influence it.
b. By providing customers with low price goods was ethically correct and none should have a problem with it as they are getting great deals.