Question 1

An industry has five firms, each with a market share of 20 percent. There is no foreign competition, entry into the industry is difficult, and no firm is on the verge of bankruptcy. If two of the firms in the industry seek to merge, this action would most likely be opposed by the government because the Herfindahl index for the industry is

Accepted Answer

A) 2,000 and the merger would increase the index by 500. 
B) 2,000 and the merger would increase the index by 800. 
C) 2,500 and the merger would increase the index by 500. 
D) 2,500 and the merger would increase the index by 1200.

Question 2

In 2013, Apple was convicted, along with five publishers, including Harper Collins, Penguin, and Macmillan, of which antitrust violation?

Accepted Answer

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

Question 3

The two alternative ways of promoting better outcomes when a natural monopoly exists are

Accepted Answer

A) subsidy and taxation. 
B) public ownership and regulation. 
C) pricing and incorporation. 
D) breaking and merging.

Question 4

One good example of a government agency involved mainly in social regulation is the Food and Drug Administration.

Accepted Answer

A) True 
 B)False

Question 5

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.

Question 6

All price discrimination is deemed illegal in antitrust legislation.

Accepted Answer

A) True 
 B)False

Question 7

Suppose the courts declare that XYZ Corporation violated the antitrust laws and as a result 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.

Question 8

Which of the following amended the Clayton Act's prohibition against mergers that substantially 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

Question 9

An industry has a single firm and is found to have violated antitrust laws. The government breaks it up into two firms that will share the market equally. The Herfindahl index for this industry would change from

Accepted Answer

A) 100 to 50. 
B) 10,000 to 2,500. 
C) 100,000 to 50,000. 
D) 10,000 to 5,000.

Question 10

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.

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.

Question 12

The so-called rule of reason, based on the 1920 U.S. Steel case, stipulates that a merger of two firms in an industry is

Accepted Answer

A) illegal if the firms are large. 
B) illegal because it increases the monopoly power of the resulting firm. 
C) legal if there is no resulting unreasonable restraint of trade. 
D) legal because the firm will be subject to regulatory control.

Question 13

Suppose that two firms in an industry that has a Herfindahl index of 1,000 announce a merger. The U.S. Justice Department concludes the merger will boost the index to 1,050. The antitrust authorities will most likely

Accepted Answer

A) ignore this merger because of the relatively small size of, and increase in, the Herfindahl index. 
B) prevent the merger, contending that it violates the Clayton Act. 
C) allow the merger if foreign entry to the industry is possible. 
D) allow the merger but watch the new firm carefully for future violations of the antitrust laws.

Question 14

How is price discrimination treated under antitrust laws?

Accepted Answer

The answer of How is price discrimination treated under antitrust...

Question 15

Conspiracies to fix prices are

Accepted Answer

A) illegal under the Clayton Act. 
B) illegal under the Celler-Kefauver Act. 
C) per se violations of the antitrust laws. 
D) more tolerated by government today than two or three decades ago.

Question 16

The Sherman Act was designed to

Accepted Answer

A) exempt commercial banks from the antitrust laws. 
B) make interlocking directorates legal. 
C) prohibit misleading and antisocial advertising. 
D) make monopoly and acts that restrain trade illegal.

Question 17

Which one of the following is concerned with social regulation?

Accepted Answer

A) Equal Employment Opportunity Commission 
B) Federal Communications Commission 
C) Sherman Commission 
D) Federal Energy Regulatory Commission

Question 18

In 1994, the U.S. Department of Justice stopped which of the following practices?

Accepted Answer

A) airlines explicitly agreeing to divide the market so that each carrier could have a local monopoly 
B) airlines preposting fare changes as a form of tacit collusion 
C) Microsoft using its monopoly power to coerce computer manufacturers to favor Internet Explorer over rival browsers 
D) price-fixing by Japanese, German, and Swedish auto parts makers

Question 19

Which one of the following acts declared "every 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

Question 20

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

Exam 21: Antitrust Policy and Regulation

In 2013, Apple was convicted, along with five publishers, including Harper Collins, Penguin, and Macmillan, of which antitrust violation?

The two alternative ways of promoting better outcomes when a natural monopoly exists are

One good example of a government agency involved mainly in social regulation is the Food and Drug Administration.

Tying agreements

All price discrimination is deemed illegal in antitrust legislation.

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

Which of the following amended the Clayton Act's prohibition against mergers that substantially lessen competition?

An industry has a single firm and is found to have violated antitrust laws. The government breaks it up into two firms that will share the market equally. The Herfindahl index for this industry would change from

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

The basic issue in the DuPont cellophane case was

The so-called rule of reason, based on the 1920 U.S. Steel case, stipulates that a merger of two firms in an industry is

Suppose that two firms in an industry that has a Herfindahl index of 1,000 announce a merger. The U.S. Justice Department concludes the merger will boost the index to 1,050. The antitrust authorities will most likely

How is price discrimination treated under antitrust laws?

Conspiracies to fix prices are

The Sherman Act was designed to

Which one of the following is concerned with social regulation?

In 1994, the U.S. Department of Justice stopped which of the following practices?

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

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