Question 1

Tying agreements are contracts by which retailers agree to charge the prices that manufacturers set on branded goods.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is most likely to increase the Herfindahl index of a particular industry?

Accepted Answer

A)  A horizontal merger between two of the industry's largest firms. 
B)  A vertical merger between one of an industry's largest firms and one of the many input suppliers in the resource market. 
C)  A conglomerate merger involving one of the industry's major firms. 
D)  An agreement by all the industry firms to divide up the market among them. 
A)  A horizontal merger between two of the industry's largest firms. 
B)  A vertical merger between one of an industry's largest firms and one of the many input suppliers in the resource market. 
C)  A conglomerate merger involving one of the industry's major firms. 
D)  An agreement by all the industry firms to divide up the market among them.

Question 3

Tying agreements:

Accepted Answer

A)  establish common boards of directors for previously competing firms. 
B)  obligate a purchaser of product X to also buy product Y from the same seller. 
C)  allow manufacturers to specify the retail prices of their products. 
D)  prohibit firms from selling their products outside of specified geographic areas. 
A)  establish common boards of directors for previously competing firms. 
B)  obligate a purchaser of product X to also buy product Y from the same seller. 
C)  allow manufacturers to specify the retail prices of their products. 
D)  prohibit firms from selling their products outside of specified geographic areas.

Question 4

Which one of the following acts declared "[e]very contract,combination ...or conspiracy,in restraint of trade or commerce among the several states ...to be illegal"?

Accepted Answer

A)  The Wheeler-Lea Act. 
B)  The Federal Trade Commission Act. 
C)  The Sherman Act. 
D)  The Interstate Commerce Act. 
A)  The Wheeler-Lea Act. 
B)  The Federal Trade Commission Act. 
C)  The Sherman Act. 
D)  The Interstate Commerce Act.

Question 5

Defenders of social regulation point out that:

Accepted Answer

A)  social regulation is a better alternative than unregulated natural monopoly. 
B)  critics who stress the high administrative and compliance costs of social regulation underestimate the social benefits that the regulations produce. 
C)  the number of regulatory agencies has declined over the past two decades. 
D)  social regulations reduce product prices. 
A)  social regulation is a better alternative than unregulated natural monopoly. 
B)  critics who stress the high administrative and compliance costs of social regulation underestimate the social benefits that the regulations produce. 
C)  the number of regulatory agencies has declined over the past two decades. 
D)  social regulations reduce product prices.

Question 6

Suppose the courts declare that XYZ Corporation violated the antitrust laws and as a result the ABC Corporation lost $100 million of profits.XYZ Corporation will have to pay ABC Corporation a monetary award of:

Accepted Answer

A)  $100 million. 
B)  $33.3 million. 
C)  $150 million. 
D)  $300 million. 
A)  $100 million. 
B)  $33.3 million. 
C)  $150 million. 
D)  $300 million.

Question 7

Which one of the following is not correct?

Accepted Answer

A)  In antitrust cases defendants attempt to define the relevant market broadly. 
B)  The courts have varied over time in their interpretations of the antitrust statutes. 
C)  Antitrust suits can only be originated by the Federal Trade Commission. 
D)  In antitrust cases the prosecution attempts to define the relevant market narrowly. 
A)  In antitrust cases defendants attempt to define the relevant market broadly. 
B)  The courts have varied over time in their interpretations of the antitrust statutes. 
C)  Antitrust suits can only be originated by the Federal Trade Commission. 
D)  In antitrust cases the prosecution attempts to define the relevant market narrowly.

Question 8

In the U.S.Steel case of 1920,the courts held that:

Accepted Answer

A)  the structure of an industry is more important than its behavior in determining violations of the antitrust laws. 
B)  any firm that faces substantial import competition is exempt from the antitrust laws. 
C)  although U.S.Steel possessed monopoly power,it had not violated the Sherman Act because it had not unreasonably used that power. 
D)  the fact that U.S.Steel possessed monopoly power was a violation of the Sherman Act. 
A)  the structure of an industry is more important than its behavior in determining violations of the antitrust laws. 
B)  any firm that faces substantial import competition is exempt from the antitrust laws. 
C)  although U.S.Steel possessed monopoly power,it had not violated the Sherman Act because it had not unreasonably used that power. 
D)  the fact that U.S.Steel possessed monopoly power was a violation of the Sherman Act.

Question 9

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 10

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 11

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 12

Critics of social regulation argue that it:

Accepted Answer

A)  causes deflation. 
B)  violates the due process clause of the U.S.Constitution. 
C)  is a relatively greater burden for small firms than for large firms. 
D)  improves allocative efficiency. 
A)  causes deflation. 
B)  violates the due process clause of the U.S.Constitution. 
C)  is a relatively greater burden for small firms than for large firms. 
D)  improves allocative efficiency.

Question 13

The decision in the U.S.Steel case:

Accepted Answer

A)  reflected a behavioralist approach to antitrust. 
B)  reflected a structuralist approach to antitrust. 
C)  divided U.S.Steel into a number of smaller companies. 
D)  ruled that U.S.Steel had engaged in illegal price-fixing. 
A)  reflected a behavioralist approach to antitrust. 
B)  reflected a structuralist approach to antitrust. 
C)  divided U.S.Steel into a number of smaller companies. 
D)  ruled that U.S.Steel had engaged in illegal price-fixing.

Question 14

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 15

Which of the following findings would be the most likely to lead the U.S.Justice Department to block a corporate merger under terms of the Clayton Act?

Accepted Answer

A)  A buyer-seller relationship between the two firms. 
B)  A high premerger Herfindahl index in the industry and a large boost in the index because of the merger. 
C)  A low pre- and post-merger concentration ratio in the industry. 
D)  Evidence that one of the firms is highly unprofitable. 
A)  A buyer-seller relationship between the two firms. 
B)  A high premerger Herfindahl index in the industry and a large boost in the index because of the merger. 
C)  A low pre- and post-merger concentration ratio in the industry. 
D)  Evidence that one of the firms is highly unprofitable.

Question 16

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 17

The largest efficiency gains from deregulation have occurred in the:

Accepted Answer

A)  natural gas and cable television industries. 
B)  cable television and railroad industries. 
C)  communications and stock-brokering industries. 
D)  airlines,trucking,and railroad industries. 
A)  natural gas and cable television industries. 
B)  cable television and railroad industries. 
C)  communications and stock-brokering industries. 
D)  airlines,trucking,and railroad industries.

Question 18

The public interest theory of industrial regulation contends that:

Accepted Answer

A)  while industrial regulation is sound in theory,bureaucrats allow monopolists to obtain excessive profits. 
B)  regulated monopolies are tantamount to legal cartels. 
C)  the objective of regulation is to protect the public from the market power inherent in natural monopolies. 
D)  firms in some industries want to be regulated. 
A)  while industrial regulation is sound in theory,bureaucrats allow monopolists to obtain excessive profits. 
B)  regulated monopolies are tantamount to legal cartels. 
C)  the objective of regulation is to protect the public from the market power inherent in natural monopolies. 
D)  firms in some industries want to be regulated.

Question 19

Where there is natural monopoly,government is most likely to implement:

Accepted Answer

A)  social regulation. 
B)  antitrust policy. 
C)  industrial regulation. 
D)  an externality containment policy. 
A)  social regulation. 
B)  antitrust policy. 
C)  industrial regulation. 
D)  an externality containment policy.

Question 20

A merger between an automobile manufacturer and a maker of automobile tires is an example of a:

Accepted Answer

A)  conglomerate merger. 
B)  horizontal merger. 
C)  vertical merger. 
D)  tying contract. 
A)  conglomerate merger. 
B)  horizontal merger. 
C)  vertical merger. 
D)  tying contract.

Exam 20: Antitrust Policy and Regulation

Tying agreements are contracts by which retailers agree to charge the prices that manufacturers set on branded goods.

Which of the following is most likely to increase the Herfindahl index of a particular industry?

Tying agreements:

Which one of the following acts declared "[e]very contract,combination ...or conspiracy,in restraint of trade or commerce among the several states ...to be illegal"?

Defenders of social regulation point out that:

Suppose the courts declare that XYZ Corporation violated the antitrust laws and as a result the ABC Corporation lost $100 million of profits.XYZ Corporation will have to pay ABC Corporation a monetary award of:

Which one of the following is not correct?

In the U.S.Steel case of 1920,the courts held that:

A firm is likely to be a natural monopoly:

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

The Clayton Act of 1914:

Critics of social regulation argue that it:

The decision in the U.S.Steel case:

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:

Which of the following findings would be the most likely to lead the U.S.Justice Department to block a corporate merger under terms of the Clayton Act?

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

The largest efficiency gains from deregulation have occurred in the:

The public interest theory of industrial regulation contends that:

Where there is natural monopoly,government is most likely to implement:

A merger between an automobile manufacturer and a maker of automobile tires is an example of 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 Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

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

Filters