Reading Comprehension

PT3 · S3 · P3 · Q20 Antitrust Law

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One type of violation of the antitrust laws is the abuse of monopoly power.

Topic

Abuse of monopoly power under antitrust laws

Framework

Answer / Explain

Main Point

The antitrust laws do not exist to eliminate monopolies or high prices alone; instead, they target and prohibit the abuse of monopoly power, specifically when it is used to exclude competition and thus harm consumer welfare. ( - last paragraph)

P1: Definition and Requirements for Abuse of Monopoly Power

The paragraph defines monopoly power as the ability to set prices above the competitive level without losing too many customers, and explains that antitrust laws only come into play if (1) a firm has monopoly power and (2) abuses it to exclude competition.

P2: Market Share and Pricing Constraints

Explains that a firm’s ability to raise prices depends on whether customers have substitute options. If a firm owns a large market share in substitutable products, it gains monopoly power, so market share becomes a helpful (but rough) measure for courts.

P3: High Prices vs. Abuse—Not All Monopolies Break the Rules

Discusses how simply having high prices (supracompetitive prices) or high market share—even driving competitors out through low prices—isn’t illegal. The law cares more about harm to consumer welfare than the existence of high prices or monopolies by themselves.

20.

Which one of the following sentences would best complete the last paragraph of the passage?

Correct
By limiting consumers’ choices, abuse
Why this is right
This sounds reasonable. It has a tie-in to the existing last sentence and it otherwise doesn't raise any red flags. The final sentence was clarifying that, "Since the main goal of antitrust laws is to promote consumers' welfare, monopoly power itself isn't against the law but abuse of monopoly power is". This answer is just spelling out the implications of that: monopoly power itself can promote consumers' welfare, but abuse of monopoly power does not.
Skill tested: Add to the Passage · how this choice captures the passage's function is the move to repeat next time.
68% picked this
What is needed now is
Opens Up New Topic Strong: needed
This would suddenly change the passage. The author was never describing a Problem for which we needed to come up with a Solution. The author was just describing antitrust laws, and in a sympathetic way, not an antagonistic way. He hasn't previously expressed a concern about the negative impacts of monopoly itself.
8% picked this
Over time, the antitrust laws
Too Narrow: comm / comp industries
The first half of this could potentially be fine, but there's no reason the author would wrap up the passage by focusing on the communications and computer systems industries. He referenced those industries very briefly at the end of the 4th paragraph, but just as an example. They were never a main focus of the passage, and nothing in the passage ever suggested that they are a particularly volatile industry. This sentence, if we remove some grammatical filler is saying, "Thus, antitrust laws have been effective in ensuring competition in the communications and computer systems industries", which is elevating those industries into the role of the central topic, where they don't belong.
5% picked this
By controlling supracompetitive prices and
Out of Scope
Out of Scope: supracompetitive profits Out of Scope: controlling prices This answer feels pretty reasonable overall, except for the fact that it invents the concept of supracompetitive profits. The idea of supracompetitive prices is discussed -- it means a price that is higher than the maximum price that would normally be charged for close substitutes. But there's no such thing as competitive profits or supracompetitive profits. Also, antitrust laws don't actually police supracompetitive prices. By themselves, they do not constitute an abuse of power. (3rd paragraph): Antitrust laws do not attempt to counter the mere existence of monopoly power, or even the use of monopoly power to extract extraordinarily high profits.
11% picked this
As noted above, the necessary
Out of Scope: as noted above
The author told us previously in the passage that antitrust laws do not police monopoly power itself. There's nothing in those laws that's violated when Wal-Mart achieves incredibly low prices through economies of scale. The author never told us that "the market provides the necessary restraints on monopoly itself". We might infer that the author, or the drafters of antitrust laws, believes something similar to that, but it certainly wasn't "noted above". Comparing this answer to (A), if we asked ourselves which one better connects to the current final sentence, (A) would win. And if we asked ourselves which one better "bookends" back to the beginning of the passage (which is about violating antitrust laws via the abuse of monopoly power), (A) would win again.
8% picked this

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