Question 1

The view that the antitrust laws need to be strongly enforced to prevent illegal business behaviors, monopolization of markets, and allocative inefficiency is known as the

Accepted Answer

A)   structuralist view of antitrust.
B)   behavioralist view of antitrust.
C)   laissez-faire perspective on antitrust.
D)   active antitrust perspective.E) C) and D)
F) None of the above

Question 2

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 1890E) A) and B)
F) A) and D)

Question 3

Critics of the regulation of natural monopolies contend that

Accepted Answer

A)   regulation increases the incentive of firms to lower costs.
B)   regulated firms may use creative accounting to reduce costs, prices, and profits.
C)   when rates of return are based on the value of real capital, an uneconomic substitution of labor for capital may occur.
D)   the industry may "capture" or control the regulatory commission.E) A) and B)
F) A) and C)

Question 4

A vertical merger involves a combining of one or more firms

Accepted Answer

A)   as the result of one firm purchasing the assets of the other.
B)   that are operating in entirely different industries.
C)   operating at different stages of the production process in a particular industry.
D)   operating at the same stage of the production process.E) None of the above
F) C) and D)

Question 5

The Federal Trade Commission

Accepted Answer

A)   is empowered to hold public hearings to investigate unfair practices.
B)   prohibits interlocking directorates in interstate industries.
C)   regulates airline fares.
D)   regulates such transportation industries as railroads and trucking.E) B) and D)
F) All of the above

Question 6

Which of the following statements is true?

Accepted Answer

A)   The active antitrust perspective believes that competitive market forces will automatically and actively reduce a firm's monopoly power in the long run.
B)   The active antitrust perspective believes that the government should play the role of officials and umpires and enforce the rules of the competitive game.
C)   The laissez-faire perspective views firms as players in a competitive game who will sometimes violate the rules in order to gain a huge advantage over others.
D)   The laissez-faire perspective believes that an active enforcement of antitrust policy is the only way to reduce the monopoly power of giant firms.E) B) and C)
F) All of the above

Question 7

Overall, economists believe that deregulation of industries formerly subjected to industrial regulation

Accepted Answer

A)   has been a clear failure.
B)   is neutral in its impact on society's well-being, creating minimal net benefits at best.
C)   has produced large net benefits for consumers and society.
D)   has produced sizable efficiency gains in the communications industry, but not in the transportation industry (railways, trucking, airlines) .E) A) and B)
F) All of the above

Question 8

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.E) A) and C)
F) All of the above

Question 9

Which is the most valid criticism of the regulation of natural monopolies and other firms subject to regulation by regulatory commissions?

Accepted Answer

A)   It is difficult to find enough honest people to serve on regulatory commissions.
B)   Such regulation is unnecessary and amounts to creeping socialism.
C)   Many members of such commissions are appointed rather than being elected.
D)   Regulated firms may have little incentive to contain costs since they are assured a "fair" return above costs.E) A) and B)
F) None of the above

Question 10

Behavioralists believe that

Accepted Answer

A)   if four or fewer firms control more than half of the market for a product, then the Sherman Act is being violated.
B)   industries should be judged on the basis of their price-output behavior and their technological progressiveness.
C)   there is no evidence that any monopolistic industry has abused its market power.
D)   all concentrations of economic power are socially undesirable.E) A) and D)
F) B) and C)

Question 11

Antitrust authorities are least likely to take action against

Accepted Answer

A)   conglomerate mergers.
B)   horizontal mergers.
C)   interlocking directorates.
D)   price-fixing.E) None of the above
F) A) and B)

Question 12

The Alcoa case

Accepted Answer

A)   supported the structuralist approach to antitrust.
B)   struck down the treble damages provision of the antitrust laws.
C)   called for federal regulation of any industry with a four-firm concentration ratio in excess of 50 percent.
D)   decision was consistent with a behavioralist approach.E) A) and B)
F) All of the above

Question 13

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.E) A) and C)
F) A) and D)

Question 14

Which would be an example of public ownership as a response to natural monopolies?

Accepted Answer

A)   Federal Energy Regulatory Commission
B)   Federal Trade Commission
C)   U.S. Food and Drug Administration
D)   U.S. Postal ServiceE) B) and D)
F) B) and C)

Question 15

(Consider This)  According to the Consider This box on catfish and art, which of the following airlines in 2007 agreed to pay $300 million in fines for fixing fuel surcharges on passenger tickets and cargo?

Accepted Answer

A)   Korean Air and British Airlines
B)   Qantas and Lufthansa
C)   United Airlines and American Airlines
D)   Virgin Atlantic and AeroflotE) None of the above
F) A) and B)

Question 16

Industrial regulation generally applies in cases where

Accepted Answer

A)   society would benefit if a monopoly is prevented from evolving in a certain market.
B)   a monopoly already exists, and the government believes that society would benefit if it is dissolved.
C)   there is an economic reason for an industry to be organized as a monopoly.
D)   foreign competition in the form of imports is prevalent in the market.E) B) and C)
F) A) and B)

Question 17

The antitrust laws are based on the

Accepted Answer

A)   creative destruction view of competition.
B)   idea that competition leads to greater economic efficiency than does a monopoly.
C)   view that nonprice competition should be strictly regulated by government.
D)   view that all negative externalities should be eliminated by government action.E) A) and C)
F) A) and B)

Question 18

Supporters of social regulation contend that

Accepted Answer

A)   the existence of natural monopoly requires a regulatory response from government.
B)   there is a pressing need to eliminate price-fixing in U.S. business.
C)   higher costs are the price that must be paid for a better society.
D)   the benefits of public ownership of businesses are greater than the costs.E) A) and B)
F) A) and C)

Question 19

The legislation that prohibited "every contract . . . or conspiracy, in restraint of trade and commerce" is the

Accepted Answer

A)   Federal Trade Commission Act.
B)   Clayton Act.
C)   Celler-Kefauver Act.
D)   Sherman Act.E) None of the above
F) A) and B)

Question 20

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.E) B) and D)
F) None of the above

Exam 21: Antitrust Policy and Regulation

A vertical merger involves a combining of one or more firms

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The Alcoa case

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The antitrust laws are based on the

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Which is the most valid criticism of the regulation of natural monopolies and other firms subject to regulation by regulatory commissions?

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(Consider This) According to the Consider This box on catfish and art, which of the following airlines in 2007 agreed to pay $300 million in fines for fixing fuel surcharges on passenger tickets and cargo?

Correct AnswerverifiedShow Answer

The legislation that prohibited "every contract . . . or conspiracy, in restraint of trade and commerce" is the

Correct AnswerverifiedShow Answer

Industrial regulation generally applies in cases where

Correct AnswerverifiedShow Answer

Critics of the regulation of natural monopolies contend that

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Antitrust authorities are least likely to take action against

Correct AnswerverifiedShow Answer

Which would be an example of public ownership as a response to natural monopolies?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Behavioralists believe that

Correct AnswerverifiedShow Answer

Overall, economists believe that deregulation of industries formerly subjected to industrial regulation

Correct AnswerverifiedShow Answer

The view that the antitrust laws need to be strongly enforced to prevent illegal business behaviors, monopolization of markets, and allocative inefficiency is known as the

Correct AnswerverifiedShow Answer

The Federal Trade Commission

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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

Correct AnswerverifiedShow Answer

Which of the following statements is true?

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

Correct AnswerverifiedShow Answer

Supporters of social regulation contend that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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