Question 1

Which of the following does not necessarily violate antitrust laws?

Accepted Answer

A) deceptive advertising 
B) price discrimination 
C) price-fixing 
D) interlocking directorates 
A) deceptive advertising 
B) price discrimination 
C) price-fixing 
D) interlocking directorates

Question 2

The view that the antitrust laws should be enforced relatively leniently because of the tendency for monopoly power to erode over time is consistent with the view that

Accepted Answer

A) monopoly structure is a sufficient basis for breaking up monopolies. 
B) only firms behaving as monopolists should be broken up. 
C) a laissez-faire perspective on antitrust is sufficient. 
D) an active antitrust policy is required. 
A) monopoly structure is a sufficient basis for breaking up monopolies. 
B) only firms behaving as monopolists should be broken up. 
C) a laissez-faire perspective on antitrust is sufficient. 
D) an active antitrust policy is required.

Question 3

The table shows market shares of firms in hypothetical industries. Assume these are distinct industries with no buyer-seller relationships or competition among them. The Herfindahl index for Alpha is

Accepted Answer

A) 2,600. 
B) 100. 
C) 2,500. 
D) 5,000. 
A) 2,600. 
B) 100. 
C) 2,500. 
D) 5,000.

Question 4

The merger of a firm in one industry with another firm in the same industry that sells similar products is called a

Accepted Answer

A) vertical merger. 
B) secondary merger. 
C) horizontal merger. 
D) conglomerate merger. 
A) vertical merger. 
B) secondary merger. 
C) horizontal merger. 
D) conglomerate merger.

Question 5

Why has one presidential administration enforced the antitrust laws more or less strictly than another?

Accepted Answer

The main reason is differences in politi

Question 6

Which of the following is correct?

Accepted Answer

A) Vertical mergers are more likely to be acceptable under antitrust laws than are horizontal mergers. 
B) A vertical merger entails the merging of two or more competing firms. 
C) Horizontal mergers are more likely to be acceptable under antitrust laws than are vertical mergers. 
D) Conglomerate mergers occur when two or more firms at various stages in a good's production are combined. 
A) Vertical mergers are more likely to be acceptable under antitrust laws than are horizontal mergers. 
B) A vertical merger entails the merging of two or more competing firms. 
C) Horizontal mergers are more likely to be acceptable under antitrust laws than are vertical mergers. 
D) Conglomerate mergers occur when two or more firms at various stages in a good's production are combined.

Question 7

Proposed ergonomics regulations are an example of industrial regulation (rather than social regulation).

Accepted Answer

A) True 
 B)False

Question 8

In the U.S. Steel case, the court ruled that

Accepted Answer

A) even though a firm's behavior might be legal, the mere possession of monopoly power was in violation of the Sherman Act. 
B) only monopolies that unreasonably restrain trade are subject to antitrust action under the Sherman Act. 
C) when made by dominant firms, tying contracts are illegal, per se. 
D) the company violated the Clayton Act and therefore should be dissolved into several competing firms. 
A) even though a firm's behavior might be legal, the mere possession of monopoly power was in violation of the Sherman Act. 
B) only monopolies that unreasonably restrain trade are subject to antitrust action under the Sherman Act. 
C) when made by dominant firms, tying contracts are illegal, per se. 
D) the company violated the Clayton Act and therefore should be dissolved into several competing firms.

Question 9

Most economists agree that, overall, U.S. antitrust policy has been most successful in

Accepted Answer

A) promoting competition and efficiency. 
B) remedying existing anticompetitive behavior. 
C) deterring price-fixing and anticompetitive mergers. 
D) breaking up monopolies. 
A) promoting competition and efficiency. 
B) remedying existing anticompetitive behavior. 
C) deterring price-fixing and anticompetitive mergers. 
D) breaking up monopolies.

Question 10

The "rule of reason" indicated that

Accepted Answer

A) if less than four firms account for three-fourths of an industry's sales, the industry is in violation of the Sherman Act. 
B) social regulation should not be enforced unreasonably so that costs exceed benefits. 
C) the mere possession of monopoly power is a violation of the antitrust laws. 
D) only contracts and combinations that unreasonably restrain trade violate the antitrust laws. 
A) if less than four firms account for three-fourths of an industry's sales, the industry is in violation of the Sherman Act. 
B) social regulation should not be enforced unreasonably so that costs exceed benefits. 
C) the mere possession of monopoly power is a violation of the antitrust laws. 
D) only contracts and combinations that unreasonably restrain trade violate the antitrust laws.

Question 11

Anticompetitive mergers are illegal under provisions of the Clayton Act (as amended).

Accepted Answer

A) True 
 B)False

Question 12

Critics of social regulation would argue that it

Accepted Answer

A) decreases prices. 
B) increases output. 
C) increases competition. 
D) decreases product innovation. 
A) decreases prices. 
B) increases output. 
C) increases competition. 
D) decreases product innovation.

Question 13

Government regulation concerning the conditions under which goods are produced, the impact of production on society, and the physical qualities of the goods is known as

Accepted Answer

A) industrial regulation. 
B) social regulation. 
C) economic regulation. 
D) antitrust regulation. 
A) industrial regulation. 
B) social regulation. 
C) economic regulation. 
D) antitrust regulation.

Question 14

How effective have antitrust laws been in breaking up existing monopolies?

Accepted Answer

Citing the rule of reason, the governmen

Question 15

What is a natural monopoly? List the two possible alternatives for promoting better economic outcomes where natural monopoly exists.

Accepted Answer

A natural monopoly exists when economies

Question 16

In which of the following sets of antitrust cases did the government gain convictions?

Accepted Answer

A) the U.S. Steel case and the Microsoft case 
B) the Alcoa case and the Microsoft case 
C) the DuPont cellophane case and the AT&T case 
D) the U.S. Steel case and the Alcoa case 
A) the U.S. Steel case and the Microsoft case 
B) the Alcoa case and the Microsoft case 
C) the DuPont cellophane case and the AT&T case 
D) the U.S. Steel case and the Alcoa case

Question 17

A criticism of social regulation is that it

Accepted Answer

A) contributes to the growth of natural monopoly. 
B) increases the rate of innovation in the economy. 
C) decreases the influence of the Federal government on business. 
D) results in many unintended and costly side effects. 
A) contributes to the growth of natural monopoly. 
B) increases the rate of innovation in the economy. 
C) decreases the influence of the Federal government on business. 
D) results in many unintended and costly side effects.

Question 18

What is most likely to happen as the output of a natural monopoly increases over the range of market demand?

Accepted Answer

A) There is a small decrease in average total cost and then it increases as output increases. 
B) There is an increase in average total cost and then it decreases as output increases. 
C) Average total cost increases as output increases. 
D) Average total cost decreases as output increases. 
A) There is a small decrease in average total cost and then it increases as output increases. 
B) There is an increase in average total cost and then it decreases as output increases. 
C) Average total cost increases as output increases. 
D) Average total cost decreases as output increases.

Question 19

Suppose the courts declare that XYZ Corporation violated the antitrust laws and as a result ABC Corporation lost $200 million of profits. XYZ Corporation will have to pay ABC Corporation a monetary award of

Accepted Answer

A) $200 million. 
B) $66.7 million. 
C) $300 million. 
D) $600 million. 
A) $200 million. 
B) $66.7 million. 
C) $300 million. 
D) $600 million.

Question 20

Which of the following is most likely to increase the Herfindahl index of a particular industry?

Accepted Answer

A) a horizontal merger between two of the industry's largest firms 
B) a vertical merger between one of an industry's largest firms and one of the many input suppliers in the resource market 
C) a conglomerate merger involving one of the industry's major firms 
D) an agreement by all the industry firms to divide up the market among them 
A) a horizontal merger between two of the industry's largest firms 
B) a vertical merger between one of an industry's largest firms and one of the many input suppliers in the resource market 
C) a conglomerate merger involving one of the industry's major firms 
D) an agreement by all the industry firms to divide up the market among them

Exam 21: Antitrust Policy and Regulation

Which of the following does not necessarily violate antitrust laws?

The view that the antitrust laws should be enforced relatively leniently because of the tendency for monopoly power to erode over time is consistent with the view that

The table shows market shares of firms in hypothetical industries. Assume these are distinct industries with no buyer-seller relationships or competition among them. The Herfindahl index for Alpha is

The merger of a firm in one industry with another firm in the same industry that sells similar products is called a

Why has one presidential administration enforced the antitrust laws more or less strictly than another?

Which of the following is correct?

Proposed ergonomics regulations are an example of industrial regulation (rather than social regulation).

In the U.S. Steel case, the court ruled that

Most economists agree that, overall, U.S. antitrust policy has been most successful in

The "rule of reason" indicated that

Anticompetitive mergers are illegal under provisions of the Clayton Act (as amended).

Critics of social regulation would argue that it

Government regulation concerning the conditions under which goods are produced, the impact of production on society, and the physical qualities of the goods is known as

How effective have antitrust laws been in breaking up existing monopolies?

What is a natural monopoly? List the two possible alternatives for promoting better economic outcomes where natural monopoly exists.

In which of the following sets of antitrust cases did the government gain convictions?

A criticism of social regulation is that it

What is most likely to happen as the output of a natural monopoly increases over the range of market demand?

Suppose the courts declare that XYZ Corporation violated the antitrust laws and as a result ABC Corporation lost $200 million of profits. XYZ Corporation will have to pay ABC Corporation a monetary award of

Which of the following is most likely to increase the Herfindahl index of a particular industry?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, RD, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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