Question 1

The general conclusion of most economists about deregulation of previously regulated industries in the United States is that it resulted in

Accepted Answer

A)  increased monopoly power.
B)  lower rates of innovation.
C)  increased bureaucratic control.
D)  decreased prices of goods and services.E) A) and B)
F) C) and D)

Question 2

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.E) A) and D)
F) B) and D)

Question 3

In which of the following cases did the final court decision result in a breakup of the firm into competing businesses?

Accepted Answer

A)  Microsoft case
B)  Standard Oil case
C)  U.S. Steel case
D)  DuPont cellophane caseE) None of the above
F) A) and B)

Question 4

In which of the following pairs of antitrust cases did the firms prevail against the antitrust charges leveled against them?

Accepted Answer

A)  the Alcoa case and the Microsoft case
B)  the U.S. Steel case and the Alcoa case
C)  the DuPont cellophane case and the U.S. Steel case
D)  the U.S. Steel case and the Microsoft caseE) A) and D)
F) A) and B)

Question 5

Monopolization is illegal under

Accepted Answer

A) True 
 B)False

Question 6

The cornerstone of antitrust policy in the United States is generally considered to be the Sherman Antitrust Act of 1890.

Accepted Answer

A) True 
 B)False

Question 7

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 D)
F) C) and D)

Question 8

The optimal amount of social regulation occurs where the marginal benefit of such regulation

Accepted Answer

A)  equals the marginal cost.
B)  exceeds the marginal cost by the greatest amount.
C)  is zero.
D)  is at its maximum.E) None of the above
F) A) and D)

Question 9

Critics of industrial regulation say that such regulation

Accepted Answer

A)  benefits small firms at the expense of large firms.
B)  perpetuates monopoly long after new technology has eroded natural monopoly.
C)  creates insurmountable principal-agent problems.
D)  has resulted mainly from the paradox of voting.E) C) and D)
F) A) and D)

Question 10

Economists who adhere to the laissez-faire antitrust perspective

Accepted Answer

A)  view competition as a long-run dynamic process in which firms battle for dominance of markets but rarely can sustain such dominance once it is achieved.
B)  believe the antitrust laws are as important today as they were when they were passed in the early 1900s.
C)  say that an industry's structure, which is based on economies of scale, usually predicts the behavior of the industry firms.
D)  contend that large, dominant firms should be broken into smaller competitive firms and then government should stand back and let competition prevail.E) B) and C)
F) B) and D)

Question 11

Most economists agree that deregulation in the 1970s and 1980s greatly benefited consumers in all of the following industries except

Accepted Answer

A)  automotive.
B)  railroads.
C)  airlines.
D)  trucking.E) A) and D)
F) A) and B)

Question 12

The idea that competition is in some circumstances insufficient to achieve allocative efficiency and ensure fairness to consumers and competing firms is most closely associated with which antitrust perspective?

Accepted Answer

A)  laissez-faire
B)  Herfindahl
C)  passive
D)  activeE) B) and C)
F) A) and D)

Question 13

A merger between one firm and another firm that is its supplier is known as a

Accepted Answer

A)  horizontal merger.
B)  vertical merger.
C)  conglomerate merger.
D)  parallel merger.E) B) and D)
F) B) and C)

Question 14

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.E) B) and D)
F) B) and C)

Question 15

Which of the following cases established that the mere possession of monopoly power violated antitrust laws?

Accepted Answer

A)  IBM case of 1982
B)  Microsoft case of 1998
C)  Alcoa case of 1945
D)  AT&T case of 1982E) None of the above
F) A) and D)

Question 16

In the 1982 AT&T antitrust case, the resolution was an out-of-court settlement involving a

Accepted Answer

A)  change in the business practices of AT&T.
B)  cease-and-desist order.
C)  breakup of AT&T into several smaller firms.
D)  takeover of AT&T by another company.E) None of the above
F) B) and D)

Question 17

Which of the following gave the Federal Trade Commission and the U.S. Justice Department the responsibility to enforce antitrust laws?

Accepted Answer

A)  the Sherman Act
B)  the Wheeler-Lea Act
C)  the Clayton Act
D)  the Federal Trade Commission ActE) All of the above
F) C) and D)

Question 18

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

Question 19

A function of the Federal Trade Commission is to

Accepted Answer

A)  investigate instances of faulty and misleading advertising.
B)  establish railway rates for interstate railroads.
C)  ban or recall unsafe consumer products.
D)  prevent insider trading in securities markets.E) B) and D)
F) None of the above

Question 20

Critics of industrial regulation say that such regulation

Accepted Answer

A)  contributes to X-inefficiency.
B)  benefits small firms at the expense of large firms.
C)  creates insurmountable principal-agent problems.
D)  suffers from the free-rider problem.E) A) and D)
F) A) and C)

Exam 21: Antitrust Policy and Regulation

Supporters of social regulation contend that

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In the 1982 AT&T antitrust case, the resolution was an out-of-court settlement involving a

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In which of the following cases did the final court decision result in a breakup of the firm into competing businesses?

Correct AnswerverifiedShow Answer

The cornerstone of antitrust policy in the United States is generally considered to be the Sherman Antitrust Act of 1890.

Correct AnswerverifiedShow Answer

In which of the following pairs of antitrust cases did the firms prevail against the antitrust charges leveled against them?

Correct AnswerverifiedShow Answer

Critics of industrial regulation say that such regulation

Correct AnswerverifiedShow Answer

Critics of industrial regulation say that such regulation

Correct AnswerverifiedShow Answer

Which of the following gave the Federal Trade Commission and the U.S. Justice Department the responsibility to enforce antitrust laws?

Correct AnswerverifiedShow Answer

The optimal amount of social regulation occurs where the marginal benefit of such regulation

Correct AnswerverifiedShow Answer

A function of the Federal Trade Commission is to

Correct AnswerverifiedShow Answer

Monopolization is illegal under

Correct AnswerverifiedShow Answer

A merger between one firm and another firm that is its supplier is known as a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following cases established that the mere possession of monopoly power violated antitrust laws?

Correct AnswerverifiedShow Answer

The idea that competition is in some circumstances insufficient to achieve allocative efficiency and ensure fairness to consumers and competing firms is most closely associated with which antitrust perspective?

Correct AnswerverifiedShow Answer

Economists who adhere to the laissez-faire antitrust perspective

Correct AnswerverifiedShow Answer

Most economists agree that deregulation in the 1970s and 1980s greatly benefited consumers in all of the following industries except

Correct AnswerverifiedShow Answer

The general conclusion of most economists about deregulation of previously regulated industries in the United States is that it resulted in

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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