Market Mechanics: Reading

The Cell Phone Industry Case Study

Name: ___________________________

Directions: Read the following passage about the cell phone industry and economic systems. You will use this information to define key terms and analyze market dynamics in the following sections.

Monopoly: Not Just a Board Game

In the business world, a monopoly is when one company controls an entire industry without any competition. Over a century ago, the U.S. started passing anti-trust laws that prohibit monopolies and other activity that reduces competition. In 2011, AT&T made a bid to buy T-Mobile. This merger would have made AT&T the nation’s largest provider, but the government intervened using these laws.

Um… There’s A Law Against That

The Sherman Anti-Trust Act (1890) prohibits companies from any activity "in restraint of trade," meaning activity that reduces competition. Additionally, the Clayton Antitrust Act (1914) gives the government power to prevent mergers that reduce competition. The Federal Trade Commission (FTC) was created to carry out these powers and stop unfair competition.

Competition With Other Countries

Tariffs are taxes on goods from other countries, encouraging domestic buying. While tariffs protect producers, they slow trade. This is why the U.S. and many other countries agreed to have zero tariffs on cell phones, helping technology develop more easily around the world.

Consumer Protection

In a mixed economy, the government protects consumers from deception and safety risks. The FTC and FCC take action against unauthorized bill charges and set health standards for signal power. In our economy, companies cannot put health at risk in their effort to compete.

Economic Systems

In a command economy, the government owns all production and sets prices. A true free market has no government interference at all. The U.S. has a mixed economy—a market economy where the government owns some property but mostly makes rules to ensure fair competition and safety.

The Market Players

Consumers are individuals or groups who buy and use goods and services. Producers are companies or people who create and sell them. In our market economy, producers compete for consumers' business, which naturally leads to lower prices and more choices for everyone.

Part 1: Key Terminology

Student: ___________________________

Directions: Define each term below in your own words. Your definitions should be thorough and explain the term's role in the economy.

Monopoly

Anti-Trust Laws

Sherman Act (1890)

Fed. Trade Commission (FTC)

Tariffs

Consumer

Producer

Mixed Economy

Command Economy

Free Market

Part 2: Evidence Analysis (A)

Student: ___________________________

Directions: Answer each question in complete sentences. You must use logical reasoning and provide specific evidence from the reading on Page 1 to support your answer.

1. Why would a "free market" advocate likely disagree with the FTC blocking a merger, and how does the text justify government intervention?

2. How does competition impact the quality of life for a cell phone user compared to a command economy? Cite specific evidence.

Part 2: Evidence Analysis (B)

Student: ___________________________

Continued: Analysis Questions 3-5

3. Why did countries agree to zero tariffs on cell phones? Use evidence regarding global technological development.

4. In a mixed economy, where does the government draw the line between a company's freedom to compete and its public responsibility?

5. Can the government still take action against a company that isn't lying to its customers? Explain using the concept of "restraint of trade."

Economic Essentials Worksheet

Economic Essentials Worksheet

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