Question

Evaluate the wisdom of having the Competition Bureau use profit as a measure of monopoly power in deciding whether to prosecute a case. Would such a rule be expected to affect the behaviour of firms with high profits? In what ways might any changes induced by such a rule be socially beneficial, and in what ways might they be socially harmful?

Answer 1

Effect on behavior of firms making high profits with such rule would be adverse. The firms will start finding ways to show less and less profits through any way. They might start hiding their extra profits or do anything to get prevented from getting sued.

Benefits to the society

There may be firms which earns high profits through illegal ways. So it would be good take action against them for the society.

It is possible that the firm earning high profit by dominating small firms by breaking laws of competition.

Harms to the society

It is possible that firm earning high profits because of innovative technology and provide products at a cheaper rate to consumers. Therefore taking actions against them is not good to society.   

Other firms who know that high profits may lead harms on them therefore they may start finding ways to hide excess profits.