Question 1

Conglomerate mergers are combinations of

Accepted Answer

A) many small firms. 
B) firms producing the same product. 
C) firms producing unrelated products. 
D) firms operating at different stages in a given production process. 
A) many small firms. 
B) firms producing the same product. 
C) firms producing unrelated products. 
D) firms operating at different stages in a given production process.

Question 2

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 government would be most likely to challenge a merger between

Accepted Answer

A) Firm 1 in Alpha and Firm 6 in Delta. 
B) Firms 3 and 4 in Beta. 
C) Firms 1 and 2 in Kappa. 
D) Firm 4 in Alpha and Firm 3 in Kappa. 
A) Firm 1 in Alpha and Firm 6 in Delta. 
B) Firms 3 and 4 in Beta. 
C) Firms 1 and 2 in Kappa. 
D) Firm 4 in Alpha and Firm 3 in Kappa.

Question 3

A conglomerate merger

Accepted Answer

A) can extend the line of products sold, extend the territories in which products are sold, or combine totally unrelated products. 
B) is defined as a merger involving two firms that previously had a buyer-seller relationship. 
C) is defined as a merger involving two firms producing the same or similar products and selling them in the same geographical market. 
D) is illegal, per se. 
A) can extend the line of products sold, extend the territories in which products are sold, or combine totally unrelated products. 
B) is defined as a merger involving two firms that previously had a buyer-seller relationship. 
C) is defined as a merger involving two firms producing the same or similar products and selling them in the same geographical market. 
D) is illegal, per se.

Question 4

Which of the following results will not occur in a monopolistic market?

Accepted Answer

A) The monopolist will maximize profits by setting a price that's higher than marginal cost. 
B) The price will be higher than what would prevail in a competitive market. 
C) In monopoly pricing, income is, in effect, transferred from consumers to the monopolist. 
D) The output level will be higher than in a competitive market. 
A) The monopolist will maximize profits by setting a price that's higher than marginal cost. 
B) The price will be higher than what would prevail in a competitive market. 
C) In monopoly pricing, income is, in effect, transferred from consumers to the monopolist. 
D) The output level will be higher than in a competitive market.

Question 5

The legislation that prohibited acquisition of stock of another company if this would significantly lessen competition is the

Accepted Answer

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

Question 6

The Herfindahl index measures the

Accepted Answer

A) size of the market share of the four largest firms in an industry. 
B) sum of the squared values of market shares of firms in an industry. 
C) increase in economic concentration resulting from a conglomerate merger. 
D) effect of per se violation in antitrust cases. 
A) size of the market share of the four largest firms in an industry. 
B) sum of the squared values of market shares of firms in an industry. 
C) increase in economic concentration resulting from a conglomerate merger. 
D) effect of per se violation in antitrust cases.

Question 7

Suppose Slow Ketchup requires that, as a condition of purchase, all restaurants using its product must buy and make available its new sales product. This arrangement is an example of

Accepted Answer

A) price-fixing. 
B) an interlocking directive. 
C) a tying contract. 
D) price discrimination. 
A) price-fixing. 
B) an interlocking directive. 
C) a tying contract. 
D) price discrimination.

Question 8

Which of the following gave the Federal Trade Commission responsibility to protect the public against false and misleading advertising?

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 9

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 Kappa is

Accepted Answer

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

Question 10

A merger that is neither horizontal nor vertical is called a

Accepted Answer

A) tying merger. 
B) conglomerate merger. 
C) Herfindahl merger. 
D) natural merger. 
A) tying merger. 
B) conglomerate merger. 
C) Herfindahl merger. 
D) natural merger.

Question 11

The antitrust laws are based on the

Accepted Answer

A) creative destruction view of competition. 
B) idea that competition leads to greater economic efficiency than does a monopoly. 
C) view that nonprice competition should be strictly regulated by government. 
D) view that all negative externalities should be eliminated by government action. 
A) creative destruction view of competition. 
B) idea that competition leads to greater economic efficiency than does a monopoly. 
C) view that nonprice competition should be strictly regulated by government. 
D) view that all negative externalities should be eliminated by government action.

Question 12

Generally speaking, if a firm faces decreasing average total costs of production throughout its entire range of output, then

Accepted Answer

A) more firms will enter the market. 
B) it will be unable to remain in business. 
C) the firm is a natural monopoly. 
D) the firm is able to earn only a normal profit. 
A) more firms will enter the market. 
B) it will be unable to remain in business. 
C) the firm is a natural monopoly. 
D) the firm is able to earn only a normal profit.

Question 13

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 industry with the least market power as measured by the Herfindahl index is

Accepted Answer

A) Delta. 
B) Beta. 
C) Alpha. 
D) Kappa. 
A) Delta. 
B) Beta. 
C) Alpha. 
D) Kappa.

Question 14

The argument that an industry that is highly concentrated will act like an anticompetitive monopolist would support the case that the application of antitrust laws should be based on industry

Accepted Answer

A) mergers. 
B) structure. 
C) regulation. 
D) behavior. 
A) mergers. 
B) structure. 
C) regulation. 
D) behavior.

Question 15

Which of the following is a per se violation?

Accepted Answer

A) price discrimination 
B) price-fixing 
C) extremely high Herfindahl index 
D) horizontal merger 
A) price discrimination 
B) price-fixing 
C) extremely high Herfindahl index 
D) horizontal merger

Question 16

Which of the following statements is true?

Accepted Answer

A) The active antitrust perspective believes that competitive market forces will automatically and actively reduce a firm's monopoly power in the long run. 
B) The active antitrust perspective believes that the government should play the role of officials and umpires and enforce the rules of the competitive game. 
C) The laissez-faire perspective views firms as players in a competitive game who will sometimes violate the rules in order to gain a huge advantage over others. 
D) The laissez-faire perspective believes that an active enforcement of antitrust policy is the only way to reduce the monopoly power of giant firms. 
A) The active antitrust perspective believes that competitive market forces will automatically and actively reduce a firm's monopoly power in the long run. 
B) The active antitrust perspective believes that the government should play the role of officials and umpires and enforce the rules of the competitive game. 
C) The laissez-faire perspective views firms as players in a competitive game who will sometimes violate the rules in order to gain a huge advantage over others. 
D) The laissez-faire perspective believes that an active enforcement of antitrust policy is the only way to reduce the monopoly power of giant firms.

Question 17

The Alcoa case

Accepted Answer

A) was based on an approach to antitrust based on monopoly structure. 
B) struck down the treble damages provision of the antitrust laws. 
C) called for federal regulation of any industry with a four-firm concentration ratio in excess of 50 percent. 
D) decision was consistent with an approach focusing on monopoly behavior. 
A) was based on an approach to antitrust based on monopoly structure. 
B) struck down the treble damages provision of the antitrust laws. 
C) called for federal regulation of any industry with a four-firm concentration ratio in excess of 50 percent. 
D) decision was consistent with an approach focusing on monopoly behavior.

Question 18

In the Microsoft antitrust case, the federal government said in essence that

Accepted Answer

A) the mere presence of monopoly violated the Sherman Act, irrespective of Microsoft's behavior. 
B) Microsoft was a "bad monopoly." 
C) Microsoft was generally a "good monopoly" but that its tying contracts involving Internet Explorer violated the Clayton Act. 
D) the case was similar to the U.S. Steel case of 1920. 
A) the mere presence of monopoly violated the Sherman Act, irrespective of Microsoft's behavior. 
B) Microsoft was a "bad monopoly." 
C) Microsoft was generally a "good monopoly" but that its tying contracts involving Internet Explorer violated the Clayton Act. 
D) the case was similar to the U.S. Steel case of 1920.

Question 19

Which of the following U.S. Supreme Court cases ruled that only monopolies that "unreasonably restrain trade" are violating antitrust laws?

Accepted Answer

A) DuPont cellophane case of 1956 
B) U.S. Steel case of 1920 
C) Alcoa case of 1945 
D) AT&T case of 1982 
A) DuPont cellophane case of 1956 
B) U.S. Steel case of 1920 
C) Alcoa case of 1945 
D) AT&T case of 1982

Question 20

The agency responsible for investigating instances of fraudulent or misleading advertising is the

Accepted Answer

A) Federal Trade Commission. 
B) Interstate Commerce Commission. 
C) Federal Communications Commission. 
D) Uniform Business Practices Commission. 
A) Federal Trade Commission. 
B) Interstate Commerce Commission. 
C) Federal Communications Commission. 
D) Uniform Business Practices Commission.

Exam 21: Antitrust Policy and Regulation

Conglomerate mergers are combinations of

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 government would be most likely to challenge a merger between

A conglomerate merger

Which of the following results will not occur in a monopolistic market?

The legislation that prohibited acquisition of stock of another company if this would significantly lessen competition is the

The Herfindahl index measures the

Suppose Slow Ketchup requires that, as a condition of purchase, all restaurants using its product must buy and make available its new sales product. This arrangement is an example of

Which of the following gave the Federal Trade Commission responsibility to protect the public against false and misleading advertising?

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 Kappa is

A merger that is neither horizontal nor vertical is called a

The antitrust laws are based on the

Generally speaking, if a firm faces decreasing average total costs of production throughout its entire range of output, then

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 industry with the least market power as measured by the Herfindahl index is

The argument that an industry that is highly concentrated will act like an anticompetitive monopolist would support the case that the application of antitrust laws should be based on industry

Which of the following is a per se violation?

Which of the following statements is true?

The Alcoa case

In the Microsoft antitrust case, the federal government said in essence that

Which of the following U.S. Supreme Court cases ruled that only monopolies that "unreasonably restrain trade" are violating antitrust laws?

The agency responsible for investigating instances of fraudulent or misleading advertising is the

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