Question 1

A major criticism of industrial regulation is that

Accepted Answer

A) it has been applied to virtually all major U.S. corporations in the post-Second World War period. 
B) marginal cost pricing has created an underallocation of resources. 
C) by allowing a fair return price, it gives natural monopolists little incentive to contain costs. 
D) regulatory commissions have frequently caused natural monopolies to go bankrupt. 
A) it has been applied to virtually all major U.S. corporations in the post-Second World War period. 
B) marginal cost pricing has created an underallocation of resources. 
C) by allowing a fair return price, it gives natural monopolists little incentive to contain costs. 
D) regulatory commissions have frequently caused natural monopolies to go bankrupt.

Question 2

The legal cartel theory of regulation argues that

Accepted Answer

A) regulation encourages firms to inflate their production costs. 
B) firms in certain industries want to be regulated rather than face the rigors of competition. 
C) social regulation has been carried beyond the point at which marginal benefits and marginal costs are equal. 
D) the government is the logical agency to protect consumers from natural monopolies. 
A) regulation encourages firms to inflate their production costs. 
B) firms in certain industries want to be regulated rather than face the rigors of competition. 
C) social regulation has been carried beyond the point at which marginal benefits and marginal costs are equal. 
D) the government is the logical agency to protect consumers from natural monopolies.

Question 3

What is a major characteristic of a natural monopoly?

Accepted Answer

A) The firm is a single seller of a resource. 
B) It sets price equal to marginal revenue. 
C) There is extensive product advertising. 
D) There is a large range for economies of scale. 
A) The firm is a single seller of a resource. 
B) It sets price equal to marginal revenue. 
C) There is extensive product advertising. 
D) There is a large range for economies of scale.

Question 4

In the 2000 decision on the Microsoft antitrust case, the eventual remedy involved a

Accepted Answer

A) change in the business practices of Microsoft. 
B) merging of Microsoft with another company. 
C) breakup of Microsoft into smaller firms. 
D) takeover of Microsoft by the government. 
A) change in the business practices of Microsoft. 
B) merging of Microsoft with another company. 
C) breakup of Microsoft into smaller firms. 
D) takeover of Microsoft by the government.

Question 5

Which would be an example of public ownership as a response to natural monopolies?

Accepted Answer

A) Federal Energy Regulatory Commission 
B) Federal Trade Commission 
C) U.S. Food and Drug Administration 
D) U.S. Postal Service 
A) Federal Energy Regulatory Commission 
B) Federal Trade Commission 
C) U.S. Food and Drug Administration 
D) U.S. Postal Service

Question 6

The government and courts have not been consistent in interpreting and enforcing antitrust laws over the years.

Accepted Answer

A) True 
 B)False

Question 7

The principal objective of industrial regulation is to

Accepted Answer

A) increase product safety. 
B) promote improvements in the quality of life. 
C) protect the consuming public from the market power of natural monopolies. 
D) solve problems associated with industry, such as the problems of water and air pollution. 
A) increase product safety. 
B) promote improvements in the quality of life. 
C) protect the consuming public from the market power of natural monopolies. 
D) solve problems associated with industry, such as the problems of water and air pollution.

Question 8

The main purpose of the antitrust laws is

Accepted Answer

A) to encourage firms to produce where P > MC. 
B) to eliminate both negative and positive externalities. 
C) to prevent the monopolization of industries. 
D) to regulate natural monopolies. 
A) to encourage firms to produce where P > MC. 
B) to eliminate both negative and positive externalities. 
C) to prevent the monopolization of industries. 
D) to regulate natural monopolies.

Question 9

Restructuring of a major industry resulted from the

Accepted Answer

A) U.S. Steel case. 
B) AT&T case. 
C) IBM case. 
D) DuPont cellophane case. 
A) U.S. Steel case. 
B) AT&T case. 
C) IBM case. 
D) DuPont cellophane case.

Question 10

Antitrust laws are essentially

Accepted Answer

A) anti-monopoly. 
B) anti-banking. 
C) anti-finance. 
D) anti-competition. 
A) anti-monopoly. 
B) anti-banking. 
C) anti-finance. 
D) anti-competition.

Question 11

The public interest theory of regulation

Accepted Answer

A) says that industries should be regulated to insure quality service at reasonable prices. 
B) says higher costs may not be passed through to consumers. 
C) protects industries from new competition. 
D) guarantees higher rates for natural monopolies. 
A) says that industries should be regulated to insure quality service at reasonable prices. 
B) says higher costs may not be passed through to consumers. 
C) protects industries from new competition. 
D) guarantees higher rates for natural monopolies.

Question 12

Movie producers A, B, and C secretly meet and agree to release their summer blockbuster films in sequence, rather than at the same time. The U.S. Justice Department learns of the agreement and files an antitrust suit. The federal government would most likely file charges under the

Accepted Answer

A)  Competitive firms A, B, and C meet and agree to charge a common price. 
B)  Competitive firms D and E, each with 35 percent market shares, merge into a single firm. 
C)  Competitive firms F and G independently charge lower prices to frequent customers than to occasional customers. 
D)  Large dominant firm H forces buyers to purchase its product X in order to buy its popular product Y. 
A)  Competitive firms A, B, and C meet and agree to charge a common price. 
B)  Competitive firms D and E, each with 35 percent market shares, merge into a single firm. 
C)  Competitive firms F and G independently charge lower prices to frequent customers than to occasional customers. 
D)  Large dominant firm H forces buyers to purchase its product X in order to buy its popular product Y.

Question 13

The legal cartel theory indicates that in any industry where market demand and the long-run average total cost curve intersect close to the latter's minimum, government regulation is mandatory and desirable.

Accepted Answer

A) True 
 B)False

Question 14

The legislation that prohibits the acquisition of assets of another company if the transaction would significantly reduce competition, thereby closing a loophole in the Clayton Act, is the

Accepted Answer

A) Sherman Act. 
B) Federal Trade Commission Act. 
C) Wheeler-Lea Act. 
D) Celler-Kefauver Act. 
A) Sherman Act. 
B) Federal Trade Commission Act. 
C) Wheeler-Lea Act. 
D) Celler-Kefauver Act.

Question 15

Which of the following indexes is used in Federal merger guidelines?

Accepted Answer

A) consumer price index 
B) unemployment benefits index 
C) employment cost index 
D) Herfindahl index 
A) consumer price index 
B) unemployment benefits index 
C) employment cost index 
D) Herfindahl index

Question 16

Critics of the regulation of natural monopolies contend that

Accepted Answer

A) regulation increases the incentive of firms to lower costs. 
B) regulated firms may use creative accounting to reduce costs, prices, and profits. 
C) when rates of return are based on the value of real capital, an uneconomic substitution of labor for capital may occur. 
D) the industry may "capture" or control the regulatory commission. 
A) regulation increases the incentive of firms to lower costs. 
B) regulated firms may use creative accounting to reduce costs, prices, and profits. 
C) when rates of return are based on the value of real capital, an uneconomic substitution of labor for capital may occur. 
D) the industry may "capture" or control the regulatory commission.

Question 17

The Clayton Act of 1914

Accepted Answer

A) outlawed price discrimination, tying contracts, acquisition of stocks of competing corporations, and interlocking directorates that lessen competition. 
B) prohibited unfair or deceptive acts or practices in commerce that tend to reduce competition. 
C) outlawed vertical and conglomerate mergers. 
D) prohibited one firm from acquiring the assets of another when the effect was to limit competition. 
A) outlawed price discrimination, tying contracts, acquisition of stocks of competing corporations, and interlocking directorates that lessen competition. 
B) prohibited unfair or deceptive acts or practices in commerce that tend to reduce competition. 
C) outlawed vertical and conglomerate mergers. 
D) prohibited one firm from acquiring the assets of another when the effect was to limit competition.

Question 18

Anticompetitive price discrimination, interlocking directorates, and tying contracts were banned by the

Accepted Answer

A) Federal Trade Commission Act. 
B) Clayton Act. 
C) Sherman Act. 
D) Celler-Kefauver Act. 
A) Federal Trade Commission Act. 
B) Clayton Act. 
C) Sherman Act. 
D) Celler-Kefauver Act.

Question 19

A merger of several firms operating in different industries-for example, a trucking company, a fast-food chain, and a brokerage house-is called

Accepted Answer

A) an integrated merger. 
B) a conglomerate merger. 
C) a vertical merger. 
D) a horizontal merger. 
A) an integrated merger. 
B) a conglomerate merger. 
C) a vertical merger. 
D) a horizontal merger.

Question 20

Social, as distinct from industrial, regulation is the major focus of the

Accepted Answer

A) Federal Trade Commission. 
B) Federal Energy Regulatory Commission. 
C) Federal Communications Commission. 
D) Consumer Product Safety Commission. 
A) Federal Trade Commission. 
B) Federal Energy Regulatory Commission. 
C) Federal Communications Commission. 
D) Consumer Product Safety Commission.

Exam 21: Antitrust Policy and Regulation

A major criticism of industrial regulation is that

The legal cartel theory of regulation argues that

What is a major characteristic of a natural monopoly?

In the 2000 decision on the Microsoft antitrust case, the eventual remedy involved a

Which would be an example of public ownership as a response to natural monopolies?

The government and courts have not been consistent in interpreting and enforcing antitrust laws over the years.

The principal objective of industrial regulation is to

The main purpose of the antitrust laws is

Restructuring of a major industry resulted from the

Antitrust laws are essentially

The public interest theory of regulation

Movie producers A, B, and C secretly meet and agree to release their summer blockbuster films in sequence, rather than at the same time. The U.S. Justice Department learns of the agreement and files an antitrust suit. The federal government would most likely file charges under the

The legal cartel theory indicates that in any industry where market demand and the long-run average total cost curve intersect close to the latter's minimum, government regulation is mandatory and desirable.

The legislation that prohibits the acquisition of assets of another company if the transaction would significantly reduce competition, thereby closing a loophole in the Clayton Act, is the

Which of the following indexes is used in Federal merger guidelines?

Critics of the regulation of natural monopolies contend that

The Clayton Act of 1914

Anticompetitive price discrimination, interlocking directorates, and tying contracts were banned by the

A merger of several firms operating in different industries-for example, a trucking company, a fast-food chain, and a brokerage house-is called

Social, as distinct from industrial, regulation is the major focus of the

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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