Question 1

The Sherman Antitrust Act of 1890 is the federal antitrust law that prohibits:

Accepted Answer

A)  monopolization and conspiracies to restrain trade. 
B)  mergers the substantially lessen competition. 
C)  exclusive dealing, tying contracts, and interlocking directorates. 
D)  unfair methods of competition in commerce. 
A)  monopolization and conspiracies to restrain trade. 
B)  mergers the substantially lessen competition. 
C)  exclusive dealing, tying contracts, and interlocking directorates. 
D)  unfair methods of competition in commerce.

Question 2

The rule of reason was an antitrust law guideline that emphasized the importance of ____ over ____.

Accepted Answer

A)  price; quantity 
B)  quantity; price 
C)  behavior; size 
D)  size; behavior 
A)  price; quantity 
B)  quantity; price 
C)  behavior; size 
D)  size; behavior

Question 3

Imperfect information is:

Accepted Answer

A)  a failure of regulators to correct the equilibrium price and quantity to their efficient levels. 
B)  an antitrust violation. 
C)  the monopoly power gained from one seller having a secret production practice. 
D)  a market failure that prevents consumers from making rational decisions. 
A)  a failure of regulators to correct the equilibrium price and quantity to their efficient levels. 
B)  an antitrust violation. 
C)  the monopoly power gained from one seller having a secret production practice. 
D)  a market failure that prevents consumers from making rational decisions.

Question 4

How did the Celler-Kefauver Act (CK Act) affect the nation's antitrust policy?

Accepted Answer

A)  The CK Act strengthened the nation's approach to merger enforcement by amending the Clayton Act. Under the CK Act, purchasing assets with the cash of another company was a potential antitrust violation. 
B)  The CK Act strengthened the nation's approach to merger enforcement by making all conglomerate mergers illegal. 
C)  The CK Act strengthened the nation's policy toward predatory pricing by clarifying that pricing lower than marginal cost was an antitrust violation. 
D)  The CK Act weakened the nation's policy by creating a loophole in the Clayton Act making mergers easier. 
A)  The CK Act strengthened the nation's approach to merger enforcement by amending the Clayton Act. Under the CK Act, purchasing assets with the cash of another company was a potential antitrust violation. 
B)  The CK Act strengthened the nation's approach to merger enforcement by making all conglomerate mergers illegal. 
C)  The CK Act strengthened the nation's policy toward predatory pricing by clarifying that pricing lower than marginal cost was an antitrust violation. 
D)  The CK Act weakened the nation's policy by creating a loophole in the Clayton Act making mergers easier.

Question 5

Exhibit 13-4: Market for Healthy Hands Lotion
 
​
In Exhibit 13-4, the makers of Healthy Hands Lotion discovered that the lotion ca n cause skin reactions, but it doesn't inform the buyers. While the market experiences imperfect information, the price and quantity will be

Accepted Answer

A)  $5.00 and 50 units. 
B)  $4.00 and 40 units. 
C)  $6.00 and 40 units. 
D)  $8.00 and 0 units. 
A)  $5.00 and 50 units. 
B)  $4.00 and 40 units. 
C)  $6.00 and 40 units. 
D)  $8.00 and 0 units.

Question 6

In the United States, regulation increased steadily in the early 1970s in the areas of

Accepted Answer

A)  health, safety, and the environment. 
B)  transportation. 
C)  telecommunications. 
D)  food and drugs. 
A)  health, safety, and the environment. 
B)  transportation. 
C)  telecommunications. 
D)  food and drugs.

Question 7

Prior to 1914, did antitrust legislation have much effect on monopoly power in the United States? Why or why not?

Accepted Answer

The Sherman Antitrust Act passed in 1890

Question 8

Economic regulation occurs when:

Accepted Answer

A)  monopoly is the optimal market structure. 
B)  the industry is highly competitive. 
C)  the product is important to economic welfare. 
D)  the government owns the assets of the industry. 
A)  monopoly is the optimal market structure. 
B)  the industry is highly competitive. 
C)  the product is important to economic welfare. 
D)  the government owns the assets of the industry.

Question 9

The most important weakness of the Sherman Antitrust Act was that:

Accepted Answer

A)  the Supreme Court refused to enforce it. 
B)  it wasn't specific about the types of acts which would violate the law. 
C)  it didn't outlaw restraints of trade. 
D)  it was too complicated. 
A)  the Supreme Court refused to enforce it. 
B)  it wasn't specific about the types of acts which would violate the law. 
C)  it didn't outlaw restraints of trade. 
D)  it was too complicated.

Question 10

Under a rule of reason approach, an act is illegal:

Accepted Answer

A)  only if it is shown to result in an anticompetitive outcome. 
B)  if two parties merge. 
C)  if a firm engages in price discrimination. 
D)  if two firms engage in price fixing. 
A)  only if it is shown to result in an anticompetitive outcome. 
B)  if two parties merge. 
C)  if a firm engages in price discrimination. 
D)  if two firms engage in price fixing.

Question 11

The government's court case against Microsoft is an example of:

Accepted Answer

A)  predatory pricing. 
B)  antitrust enforcement. 
C)  economic regulation. 
D)  the regulatory dilemma. 
A)  predatory pricing. 
B)  antitrust enforcement. 
C)  economic regulation. 
D)  the regulatory dilemma.

Question 12

A merger between two firms that have a supplier-purchaser relationship is:

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  conglomerate. 
D)  illegal. 
A)  horizontal. 
B)  vertical. 
C)  conglomerate. 
D)  illegal.

Question 13

Ever since the creation of the interstate highway system, the railroads have had to compete with trucks for freight shipments. Union Pacific, the nation's largest railroad, now offers door-to-door services to clients, using their own trains and trucks. This must be the result of:

Accepted Answer

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

Question 14

Exhibit 13-3 A monopolist
 
In Exhibit 13-3, if this industry is regulated and the regulatory commission wants price to be set equal to marginal cost, the proper price and output combination to be set is:

Accepted Answer

A)  price = $8; output = 30. 
B)  price = $5; output = 40. 
C)  price = $4; output = 25. 
D)  price = $3; output = 50. 
A)  price = $8; output = 30. 
B)  price = $5; output = 40. 
C)  price = $4; output = 25. 
D)  price = $3; output = 50.

Question 15

In which antitrust case did the Supreme Court begin to apply the per se rule to determine whether a firm was in violation of the Sherman Antitrust Act?

Accepted Answer

A)  The Standard Oil case. 
B)  The Alcoa case. 
C)  The IBM case. 
D)  The MIT case. 
A)  The Standard Oil case. 
B)  The Alcoa case. 
C)  The IBM case. 
D)  The MIT case.

Question 16

Products that result in external benefits for society require regulation to correct for

Accepted Answer

A)  underproduction. 
B)  overproduction. 
C)  an equilibrium price that is too low. 
D)  an equilibrium quantity that is too high. 
A)  underproduction. 
B)  overproduction. 
C)  an equilibrium price that is too low. 
D)  an equilibrium quantity that is too high.

Question 17

A vertical merger occurs when:

Accepted Answer

A)  the products of the merging firms were not related in any manner before the merger. 
B)  the merging partners were competitors before the merger. 
C)  one firm is a domestic firm, and the other is a foreign company. 
D)  the firms stood in a buyer-seller relationship before the merger. 
A)  the products of the merging firms were not related in any manner before the merger. 
B)  the merging partners were competitors before the merger. 
C)  one firm is a domestic firm, and the other is a foreign company. 
D)  the firms stood in a buyer-seller relationship before the merger.

Question 18

When the court determines that a firm's size alone is sufficient to find that it violated antitrust laws, this criterion is called:

Accepted Answer

A)  natural monopoly. 
B)  economies of scale. 
C)  per se. 
D)  rule of reason. 
A)  natural monopoly. 
B)  economies of scale. 
C)  per se. 
D)  rule of reason.

Question 19

Exhibit 13-1 Cable television monopolist
 
As shown in Exhibit 13-1, regulators might follow a marginal cost pricing strategy and require the cable television monopolist to operate at point:

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 20

Officers of five large building-materials companies meet and agree than none of them will submit bids on government contracts lower than an agreed-upon level. This is an example of:

Accepted Answer

A)  price fixing. 
B)  vertical restriction. 
C)  a tying contract. 
D)  an interlocking directorate. 
A)  price fixing. 
B)  vertical restriction. 
C)  a tying contract. 
D)  an interlocking directorate.

Exam 13: Antitrust and Regulation

The Sherman Antitrust Act of 1890 is the federal antitrust law that prohibits:

The rule of reason was an antitrust law guideline that emphasized the importance of ____ over ____.

Imperfect information is:

How did the Celler-Kefauver Act (CK Act) affect the nation's antitrust policy?

Exhibit 13-4: Market for Healthy Hands Lotion ​ In Exhibit 13-4, the makers of Healthy Hands Lotion discovered that the lotion ca n cause skin reactions, but it doesn't inform the buyers. While the market experiences imperfect information, the price and quantity will be

In the United States, regulation increased steadily in the early 1970s in the areas of

Prior to 1914, did antitrust legislation have much effect on monopoly power in the United States? Why or why not?

Economic regulation occurs when:

The most important weakness of the Sherman Antitrust Act was that:

Under a rule of reason approach, an act is illegal:

The government's court case against Microsoft is an example of:

A merger between two firms that have a supplier-purchaser relationship is:

Ever since the creation of the interstate highway system, the railroads have had to compete with trucks for freight shipments. Union Pacific, the nation's largest railroad, now offers door-to-door services to clients, using their own trains and trucks. This must be the result of:

Exhibit 13-3 A monopolist In Exhibit 13-3, if this industry is regulated and the regulatory commission wants price to be set equal to marginal cost, the proper price and output combination to be set is:

In which antitrust case did the Supreme Court begin to apply the per se rule to determine whether a firm was in violation of the Sherman Antitrust Act?

Products that result in external benefits for society require regulation to correct for

A vertical merger occurs when:

When the court determines that a firm's size alone is sufficient to find that it violated antitrust laws, this criterion is called:

Exhibit 13-1 Cable television monopolist As shown in Exhibit 13-1, regulators might follow a marginal cost pricing strategy and require the cable television monopolist to operate at point:

Officers of five large building-materials companies meet and agree than none of them will submit bids on government contracts lower than an agreed-upon level. This is an example of:

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Environmental Economics

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Understanding Direct and Inverse Relationships between Variables

Filters

The rule of reason was an antitrust law guideline that emphasized the importance of over .

Exhibit 13-4: Market for Healthy Hands Lotion In Exhibit 13-4, the makers of Healthy Hands Lotion discovered that the lotion ca n cause skin reactions, but it doesn't inform the buyers. While the market experiences imperfect information, the price and quantity will be