Question 1

Antitrust legislation in the United States in recent decades has

Accepted Answer

A)  been vigorously and consistently enforced. 
B)  been uniformly ignored with respect to enforcement. 
C)  varied between the extremes of being enforced and being ignored. 
D)  destroyed the American dream for the nation's entrepreneurs. 
A)  been vigorously and consistently enforced. 
B)  been uniformly ignored with respect to enforcement. 
C)  varied between the extremes of being enforced and being ignored. 
D)  destroyed the American dream for the nation's entrepreneurs.

Question 2

Which of the following is not a true statement about how social regulation differs from industrial regulation?

Accepted Answer

A)  Social regulation applies to many industries across the board, whereas industrial regulation is more specific to one industry. 
B)  Social regulation intrudes into the day-to-day production processes of companies more so than industrial regulation. 
C)  Social regulation is enforced by state and local governments, whereas industrial regulation tends to be the domain of the federal government. 
D)  Social regulation has expanded rapidly during the same period in which industrial regulation has waned. 
A)  Social regulation applies to many industries across the board, whereas industrial regulation is more specific to one industry. 
B)  Social regulation intrudes into the day-to-day production processes of companies more so than industrial regulation. 
C)  Social regulation is enforced by state and local governments, whereas industrial regulation tends to be the domain of the federal government. 
D)  Social regulation has expanded rapidly during the same period in which industrial regulation has waned.

Question 3

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 4

A firm charged with monopolizing a market is less likely to be convicted if

Accepted Answer

A)  the court accepts a broad definition of the market. 
B)  the court accepts a narrow definition of the market. 
C)  it has gained its monopoly through abusive means. 
D)  it sells its product to other firms, rather than directly to consumers. 
A)  the court accepts a broad definition of the market. 
B)  the court accepts a narrow definition of the market. 
C)  it has gained its monopoly through abusive means. 
D)  it sells its product to other firms, rather than directly to consumers.

Question 5

Which of the following is directly illegal under the Sherman Act?

Accepted Answer

A)  price discrimination 
B)  tying contracts 
C)  price-fixing 
D)  interlocking directorates 
A)  price discrimination 
B)  tying contracts 
C)  price-fixing 
D)  interlocking directorates

Question 6

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 7

A firm is likely to be a natural monopoly

Accepted Answer

A)  when the demand for its product or service is inelastic. 
B)  if it is producing an inferior good. 
C)  if economies of scale are experienced over the full range of output. 
D)  because government grants it an exclusive franchise. 
A)  when the demand for its product or service is inelastic. 
B)  if it is producing an inferior good. 
C)  if economies of scale are experienced over the full range of output. 
D)  because government grants it an exclusive franchise.

Question 8

Social regulation consists of regulating the behavior of people in society in order to promote the safety and harmony in neighborhoods.

Accepted Answer

A) True 
 B)False

Question 9

The regulation of natural monopolies has been criticized because it creates a tendency for regulated firms to use too much labor and too little capital in the production process.

Accepted Answer

A) True 
 B)False

Question 10

In 2007 British Airlines and Korean Air were charged with which antitrust violation?

Accepted Answer

A)  monopoly structure 
B)  price-fixing 
C)  tying contracts 
D)  dividing up the market 
A)  monopoly structure 
B)  price-fixing 
C)  tying contracts 
D)  dividing up the market

Question 11

The basic issue in the DuPont cellophane case was

Accepted Answer

A)  whether trade crossed state lines. 
B)  defining the relevant market. 
C)  structure versus behavior. 
D)  the rule of reason. 
A)  whether trade crossed state lines. 
B)  defining the relevant market. 
C)  structure versus behavior. 
D)  the rule of reason.

Question 12

An example of a government organization involved primarily in public regulation or industrial regulation of natural monopolies would be the

Accepted Answer

A)  Food and Drug Administration. 
B)  Environmental Protection Agency. 
C)  Federal Energy Regulatory Commission. 
D)  Occupational Safety and Health Administration. 
A)  Food and Drug Administration. 
B)  Environmental Protection Agency. 
C)  Federal Energy Regulatory Commission. 
D)  Occupational Safety and Health Administration.

Question 13

The U.S. Steel case of 1920 and the Alcoa case of 1945 dealt with which antitrust question?

Accepted Answer

A)  To what extent should firms be limited in buying plant and equipment from other firms? 
B)  Should an industry be judged by its behavior or by its structure? 
C)  Should the steel and aluminum industries be considered natural monopolies? 
D)  Should mergers be permitted between firms in closely related industries? 
A)  To what extent should firms be limited in buying plant and equipment from other firms? 
B)  Should an industry be judged by its behavior or by its structure? 
C)  Should the steel and aluminum industries be considered natural monopolies? 
D)  Should mergers be permitted between firms in closely related industries?

Question 14

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 15

Strict enforcement of antitrust laws will generally complement the economic objective of encouraging new technologies that require large amounts of capital investment.

Accepted Answer

A) True 
 B)False

Question 16

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 17

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 18

Regulation of business, according to the legal cartel theory, stems from

Accepted Answer

A)  the public wanting protection from potentially capricious firms. 
B)  economists who see greater efficiency in regulated industries. 
C)  lawyers whose jobs are more secure in cartels. 
D)  firms wanting to be regulated in order to shut off competition. 
A)  the public wanting protection from potentially capricious firms. 
B)  economists who see greater efficiency in regulated industries. 
C)  lawyers whose jobs are more secure in cartels. 
D)  firms wanting to be regulated in order to shut off competition.

Question 19

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 20

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.

Exam 21: Antitrust Policy and Regulation

Antitrust legislation in the United States in recent decades has

Which of the following is not a true statement about how social regulation differs from industrial regulation?

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

A firm charged with monopolizing a market is less likely to be convicted if

Which of the following is directly illegal under the Sherman Act?

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

A firm is likely to be a natural monopoly

Social regulation consists of regulating the behavior of people in society in order to promote the safety and harmony in neighborhoods.

The regulation of natural monopolies has been criticized because it creates a tendency for regulated firms to use too much labor and too little capital in the production process.

In 2007 British Airlines and Korean Air were charged with which antitrust violation?

The basic issue in the DuPont cellophane case was

An example of a government organization involved primarily in public regulation or industrial regulation of natural monopolies would be the

The U.S. Steel case of 1920 and the Alcoa case of 1945 dealt with which antitrust question?

Critics of social regulation would argue that it

Strict enforcement of antitrust laws will generally complement the economic objective of encouraging new technologies that require large amounts of capital investment.

Which of the following is correct?

The "rule of reason" indicated that

Regulation of business, according to the legal cartel theory, stems from

The principal objective of industrial regulation is to

A merger that is neither horizontal nor vertical is called a

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role 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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