Deck 29: Antitrust

Question 1

In comparison to perfect competition, monopoly price-quantity combinations generate

A)a consumer surplus that is smaller.
B)a producer surplus that is smaller.
C)total revenue to the producer that is smaller.
D)a reduction in deadweight loss.

Answer 1

A

Question 2

The problem with the way people used Napster, Kazaa, and other music download services is that they violated the monopoly that is legally granted to

A)holders of patents.
B)all artists.
C)holders of copyrights.
D)consumers of music.

Answer 2

C

Question 3

In comparison to perfect competition, monopoly price-quantity combinations generate

A)a consumer surplus that is larger.
B)a producer surplus that is larger.
C)total revenue to the producer that is smaller.
D)a reduction in deadweight loss.

Answer 3

B

Question 4

Standard Oil was broken into smaller businesses by the courts because

A)it was too profitable.
B)it dominated every aspect of the oil and gasoline business.
C)it's products were harmful.
D)it's owner agreed with the judge to lower prices.

Question 5

With a natural monopoly, the potentially insurmountable barrier to entry is the

A)increasing average costs.
B)the absence of fixed costs.
C)decreasing average total costs.
D)low profit margins.

Question 6

If two airlines wish to merge they must seek permission of the

A)Federal Trade Commission.
B)Federal Communications Commission.
C)Federal Anti-Trust Agency.
D)Agency for International Air Traffic.

Question 7

Monopolies such as those created by copyrights and patents

A)are necessary to motivate innovation and authorship.
B)inhibit but do not prevent innovation and authorship.
C)stifle innovation and authorship.
D)lower prices.

Question 8

Economists refer to a monopoly that results from very high fixed costs as a

A)unnatural monopoly.
B)a necessary monopoly.
C)a natural monopoly.
D)a simple monopoly.

Question 9

In Figure 29.1 the area that represents the value to the consumer under perfect competition is

A)OACQ_PC
B)OABQ_Monopoly
C)ABC
D)P_PCAC

Question 10

A natural monopoly occurs when
A)there are high fixed costs.
B)continuously decreasing average total costs.
C)continuously increasing marginal costs.
D)

A)and B)

Question 11

In comparison to perfect competition, monopoly price-quantity combinations generate

A)a consumer surplus that is larger.
B)a producer surplus that is smaller.
C)total revenue to the producer that is smaller.
D)a combination of producer and consumer surplus that is smaller.

Question 12

The contestable markets hypothesis differs from the requirements for perfect competition in that

A)the former requires many competitors and the latter only one … who fears competition.
B)the latter requires many competitors and the former only one … who fears competition.
C)the former doesn't require freedom of entry and the latter does.
D)the latter doesn't require freedom of entry and the former does.

Question 13

In comparison to perfect competition, monopoly price-quantity combinations generate

A)a consumer surplus that is larger.
B)a producer surplus that is smaller.
C)total revenue to the producer that is larger.
D)a reduction in deadweight loss.

Question 14

In comparison to perfect competition, monopoly price-quantity combinations generate

A)a consumer surplus that is larger.
B)a producer surplus that is smaller.
C)total revenue to the producer that is smaller.
D)deadweight loss.

Question 15

The law that governs most government regulation of monopoly is

A)the Fair Trade Act.
B)the End to Monopoly Act.
C)the Wagner Anti-Monopoly Act.
D)the Sherman Anti-Trust Act.

Question 16

In comparison to perfect competition, monopoly

A)motivates greater quality innovation.
B)motivates greater cost saving by management.
C)reduces the motivation to make a profit.
D)reduces the motivation to innovate.

Question 17

An early application of anti-trust law, to force the breakup of one firm's vertically integrated control over every aspect of the production, processing and distribution of an essential product, occurred in the

A)AT&T Case.
B)Microsoft case.
C)Standard Oil case.
D)Napster case.

Question 18

Under the Sherman Anti-Trust Act it is illegal to

A)successfully undercut a competitor's price.
B)use monopoly power in one market to foster a monopoly in another.
C)charge high prices.
D)innovate in such a way that others cannot keep up.

Question 19

In Figure 29.1 the area that represents the value to the consumer under monopoly is

A)OACQ_PC
B)OABQ_Monopoly
C)ABC
D)P_PCAC

Question 20

The hypothesis that suggests that one firm who fears the arrival of competitors is all that is required to experience most of the benefits of perfect competition is the

A)law of demand hypothesis.
B)all-about-me hypothesis.
C)contestable markets hypothesis.
D)rational expectations hypothesis.

Question 21

In Figure 29.1 the area that represents the total variable cost to producers under perfect competition is

A)OP_PCCQ_PC
B)OP_monopolyBQ_monopoly
C)OFCQ_PC
D)OFEQ_monopoly

Question 22

In Figure 29.1 the area that represents the amount the consumers pay the producer under monopoly is

A)OP_PCCQ_PC
B)OP_monopolyBQ_monopoly
C)OFCQ_PC
D)OFEQ_monopoly

Question 23

In Figure 29.1 the area that represents the producer surplus under monopoly is

A)P_PCAC
B)P_monopolyAB
C)FP_PCC
D)FP_monopolyBE

Question 24

In Figure 29.1 the deadweight loss associated with monopoly is

A)ABC
B)EBC
C)P_monopolyAB
D)FP_PCC

Question 25

In the Standard Oil case the company was accused of violating the law that prohibits

A)firms from using their monopoly in one market to increase market share in another.
B)firms from attempting to undercut competitors' prices.
C)firms from successfully achieving monopoly status.
D)charging prices that are unfairly too high.

Question 26

The result of the Microsoft case was that

A)the federal government (and most state governments)settled for much less than they originally sought.
B)Microsoft was broken up.
C)Microsoft won the case in every court in which it was tried.
D)the case was dropped and Microsoft paid no damages to anyone.

Question 27

The result of the Microsoft case was that

A)the case was dropped and Microsoft paid no damages to anyone.
B)Microsoft was broken up.
C)Microsoft won the case in every court in which it was tried.
D)The breakup remedy proposed by the trial judge was overturned on appeal.

Question 28

In Figure 29.1 the area that represents the producer surplus under perfect competition is

A)P_PCAC
B)P_monopolyAB
C)FP_PCC
D)FP_monopolyBE

Question 29

The European Union has prosecuted cases against which American firms for violations of their antitrust laws?

A)Apple and Google
B)GM and Ford
C)Kraft and Kellogg
D)Sirius and XM Radio

Question 30

In Figure 29.1 the area that represents the total variable cost to the producer under monopoly is

A)OP_PCCQ_PC
B)OP_monopolyBQ_monopoly
C)OFCQ_PC
D)OFEQ_monopoly

Question 31

Following court rulings against file-sharing services Napster and Kazaa, Apple Computer successfully introduced its iTunes music download software that exploited the company's

A)fear of entry by large competitors such as Microsoft.
B)extensive political connections.
C)popular iPod brand of audio hardware.
D)clunky desktop user interface.

Question 32

As of late-2007, Apple Computer's use of music download software to reinforce its already dominant position in the audio hardware market has been

A)challenged by the U.S. government but not by the European Union.
B)challenged by the European Union but not by the U.S. government.
C)challenged by both the U.S. government and the European Union.
D)challenged by both Napster and Kazaa as anti-competitive violation of the Sherman Anti-Trust Act.

Question 33

The European Union has prosecuted cases against Apple and Google for violations of their antitrust laws. Specifically they were accused of

A)using their dominance in one area to dominate another.
B)producing products for less than their cost.
C)producing products/services that are better than their European competition.
D)paying their workers less than their European competition.

Question 34

In the IBM case the company was accused of violating the law that prohibits

A)firms from using their monopoly in one market to increase market share in another.
B)firms from attempting to undercut competitors' prices.
C)firms from successfully achieving monopoly status.
D)charging prices that are unfairly too high.

Question 35

In the Microsoft case the company was accused of violating the law the prohibits

A)firms from using their monopoly in one market to increase market share in another.
B)firms from attempting to undercut competitors' prices.
C)firms from successfully achieving monopoly status.
D)charging prices that are unfairly too high.

Question 36

The 1969 IBM case ended when

A)mainframe computers gradually replaced PCs in economic importance.
B)Apple and Microsoft dropped their complaints against IBM.
C)the U.S. Justice Department dropped the case in 1982.
D)IBM won an injunction against Apple's production of PCs.

Question 37

In Figure 29.1 the area that represents the consumer surplus under monopoly is

A)P_PCAC
B)P_monopolyAB
C)FP_PCC
D)FP_monopolyBE

Question 38

In Figure 29.1 the area that represents the amount the consumers pay the producers under perfect competition is

A)OP_PCCQ_PC
B)OP_monopolyBQ_monopoly
C)OFCQ_PC
D)OFEQ_monopoly

Question 39

In Figure 29.1 the area that represents the consumer surplus under perfect competition is

A)P_PCAC
B)P_monopolyAB
C)FP_PCC
D)FP_monopolyBE