Question 1

The optimal amount of social regulation occurs where the marginal benefit of such regulation

Accepted Answer

A) equals the marginal cost. 
B) exceeds the marginal cost by the greatest amount. 
C) is zero. 
D) is at its maximum. 
A) equals the marginal cost. 
B) exceeds the marginal cost by the greatest amount. 
C) is zero. 
D) is at its maximum.

Question 2

Economists who adhere to the laissez-faire antitrust perspective

Accepted Answer

A) view competition as a long-run dynamic process in which firms battle for dominance of markets but rarely can sustain such dominance once it is achieved. 
B) believe the antitrust laws are as important today as they were when they were passed in the early 1900s. 
C) say that an industry's structure, which is based on economies of scale, usually predicts the behavior of the industry firms. 
D) contend that large, dominant firms should be broken into smaller competitive firms and then government should stand back and let competition prevail. 
A) view competition as a long-run dynamic process in which firms battle for dominance of markets but rarely can sustain such dominance once it is achieved. 
B) believe the antitrust laws are as important today as they were when they were passed in the early 1900s. 
C) say that an industry's structure, which is based on economies of scale, usually predicts the behavior of the industry firms. 
D) contend that large, dominant firms should be broken into smaller competitive firms and then government should stand back and let competition prevail.

Question 3

Most economists agree that deregulation in the 1970s and 1980s greatly benefited consumers in all of the following industries except

Accepted Answer

A) automotive. 
B) railroads. 
C) airlines. 
D) trucking. 
A) automotive. 
B) railroads. 
C) airlines. 
D) trucking.

Question 4

Suppose a court rules that the ABC Corporation is in violation of the antitrust laws because it produces 70 percent of the output of its industry. This decision is consistent with the

Accepted Answer

A) U.S. Steel case. 
B) Alcoa case. 
C) behavioralist approach to antitrust. 
D) legal cartel theory of regulation. 
A) U.S. Steel case. 
B) Alcoa case. 
C) behavioralist approach to antitrust. 
D) legal cartel theory of regulation.

Question 5

Critics of industrial regulation say that such regulation

Accepted Answer

A) contributes to X-inefficiency. 
B) benefits small firms at the expense of large firms. 
C) creates insurmountable principal-agent problems. 
D) suffers from the free-rider problem. 
A) contributes to X-inefficiency. 
B) benefits small firms at the expense of large firms. 
C) creates insurmountable principal-agent problems. 
D) suffers from the free-rider problem.

Question 6

The idea that competition is in some circumstances insufficient to achieve allocative efficiency and ensure fairness to consumers and competing firms is most closely associated with which antitrust perspective?

Accepted Answer

A) laissez-faire 
B) Herfindahl 
C) passive 
D) active 
A) laissez-faire 
B) Herfindahl 
C) passive 
D) active

Question 7

Which of the following laws prohibited mergers by stock acquisition if the effect was to lessen competition?

Accepted Answer

A) Celler-Kefauver Act of 1950 
B) Wheeler-Lea Act of 1938 
C) Clayton Act of 1914 
D) Sherman Act of 1890 
A) Celler-Kefauver Act of 1950 
B) Wheeler-Lea Act of 1938 
C) Clayton Act of 1914 
D) Sherman Act of 1890

Question 8

In which of the following cases did the final court decision result in a breakup of the firm into competing businesses?

Accepted Answer

A) Microsoft case 
B) Standard Oil case 
C) U.S. Steel case 
D) DuPont cellophane case 
A) Microsoft case 
B) Standard Oil case 
C) U.S. Steel case 
D) DuPont cellophane case

Question 9

Which of the following gave the Federal Trade Commission and the U.S. Justice Department the responsibility to enforce antitrust laws?

Accepted Answer

A) the Sherman Act 
B) the Wheeler-Lea Act 
C) the Clayton Act 
D) the Federal Trade Commission Act 
A) the Sherman Act 
B) the Wheeler-Lea Act 
C) the Clayton Act 
D) the Federal Trade Commission Act

Question 10

Suppose the firms in a five-firm industry have market shares of 30, 30, 20, 10, and 10 percent, respectively. The Herfindahl index for the industry is

Accepted Answer

A) 1,900. 
B) 2,400. 
C) 90. 
D) 10,000. 
A) 1,900. 
B) 2,400. 
C) 90. 
D) 10,000.

Question 11

The cornerstone of antitrust policy in the United States is generally considered to be the Sherman Antitrust Act of 1890.

Accepted Answer

A) True 
 B)False

Question 12

Supporters of social regulation contend that

Accepted Answer

A) the existence of natural monopoly requires a regulatory response from government. 
B) there is a pressing need to eliminate price-fixing in U.S. business. 
C) higher costs are the price that must be paid for a better society. 
D) the benefits of public ownership of businesses are greater than the costs. 
A) the existence of natural monopoly requires a regulatory response from government. 
B) there is a pressing need to eliminate price-fixing in U.S. business. 
C) higher costs are the price that must be paid for a better society. 
D) the benefits of public ownership of businesses are greater than the costs.

Question 13

Which of the following cases established that the mere possession of monopoly power violated antitrust laws?

Accepted Answer

A) IBM case of 1982 
B) Microsoft case of 1998 
C) Alcoa case of 1945 
D) AT&T case of 1982 
A) IBM case of 1982 
B) Microsoft case of 1998 
C) Alcoa case of 1945 
D) AT&T case of 1982

Question 14

In which of the following pairs of antitrust cases did the firms prevail against the antitrust charges leveled against them?

Accepted Answer

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

Question 15

Critics of industrial regulation say that such regulation

Accepted Answer

A) benefits small firms at the expense of large firms. 
B) perpetuates monopoly long after new technology has eroded natural monopoly. 
C) creates insurmountable principal-agent problems. 
D) has resulted mainly from the paradox of voting. 
A) benefits small firms at the expense of large firms. 
B) perpetuates monopoly long after new technology has eroded natural monopoly. 
C) creates insurmountable principal-agent problems. 
D) has resulted mainly from the paradox of voting.

Question 16

In the 1982 AT&T antitrust case, the resolution was an out-of-court settlement involving a

Accepted Answer

A) change in the business practices of AT&T. 
B) cease-and-desist order. 
C) breakup of AT&T into several smaller firms. 
D) takeover of AT&T by another company. 
A) change in the business practices of AT&T. 
B) cease-and-desist order. 
C) breakup of AT&T into several smaller firms. 
D) takeover of AT&T by another company.

Question 17

The general conclusion of most economists about deregulation of previously regulated industries in the United States is that it resulted in

Accepted Answer

A) increased monopoly power. 
B) lower rates of innovation. 
C) increased bureaucratic control. 
D) decreased prices of goods and services. 
A) increased monopoly power. 
B) lower rates of innovation. 
C) increased bureaucratic control. 
D) decreased prices of goods and services.

Question 18

A merger between one firm and another firm that is its supplier is known as a

Accepted Answer

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

Question 19

A function of the Federal Trade Commission is to

Accepted Answer

A) investigate instances of faulty and misleading advertising. 
B) establish railway rates for interstate railroads. 
C) ban or recall unsafe consumer products. 
D) prevent insider trading in securities markets. 
A) investigate instances of faulty and misleading advertising. 
B) establish railway rates for interstate railroads. 
C) ban or recall unsafe consumer products. 
D) prevent insider trading in securities markets.

Question 20

Monopolization is illegal under

Accepted Answer

A) True 
 B)False

Exam 21: Antitrust Policy and Regulation

The optimal amount of social regulation occurs where the marginal benefit of such regulation

Economists who adhere to the laissez-faire antitrust perspective

Most economists agree that deregulation in the 1970s and 1980s greatly benefited consumers in all of the following industries except

Suppose a court rules that the ABC Corporation is in violation of the antitrust laws because it produces 70 percent of the output of its industry. This decision is consistent with the

Critics of industrial regulation say that such regulation

The idea that competition is in some circumstances insufficient to achieve allocative efficiency and ensure fairness to consumers and competing firms is most closely associated with which antitrust perspective?

Which of the following laws prohibited mergers by stock acquisition if the effect was to lessen competition?

In which of the following cases did the final court decision result in a breakup of the firm into competing businesses?

Which of the following gave the Federal Trade Commission and the U.S. Justice Department the responsibility to enforce antitrust laws?

Suppose the firms in a five-firm industry have market shares of 30, 30, 20, 10, and 10 percent, respectively. The Herfindahl index for the industry is

The cornerstone of antitrust policy in the United States is generally considered to be the Sherman Antitrust Act of 1890.

Supporters of social regulation contend that

Which of the following cases established that the mere possession of monopoly power violated antitrust laws?

In which of the following pairs of antitrust cases did the firms prevail against the antitrust charges leveled against them?

Critics of industrial regulation say that such regulation

In the 1982 AT&T antitrust case, the resolution was an out-of-court settlement involving a

The general conclusion of most economists about deregulation of previously regulated industries in the United States is that it resulted in

A merger between one firm and another firm that is its supplier is known as a

A function of the Federal Trade Commission is to

Monopolization is illegal under

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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