Question 1

The U.S. Justice Department, the Federal Trade Commission, state attorneys general, and injured private parties can independently file charges against firms under the Sherman Act.

Accepted Answer

A) True 
 B)False

Question 2

Government regulation of firms' prices or "rates" in selected industries is the focus of

Accepted Answer

A)   social regulation.
B)   industrial regulation.
C)   antitrust policy.
D)   incomes policy.E) A) and C)
F) A) and B)

Question 3

Which of the following beliefs is not strongly espoused by the "laissez-faire perspective" in antitrust policy?

Accepted Answer

A)   Competition among firms is a battle for dominance.
B)   The focus of antitrust policy should be on market structure rather than behavior.
C)   Competition and creative destruction could lead to monopolies.
D)   Monopoly pricing and profits create incentives for firms that are economically beneficial.E) B) and C)
F) None of the above

Question 4

Proposed ergonomics regulations are an example of industrial regulation (rather than social regulation).

Accepted Answer

A) True 
 B)False

Question 5

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) None of the above
F) C) and D)

Question 6

Suppose that two firms in an industry with a Herfindahl index of 5,000 announce a merger. The U.S. Justice Department concludes the merger will boost the index to 5,500. The antitrust authorities will most likely

Accepted Answer

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

Question 7

(Last Word)  In 2015, Google was indicted by European Union antitrust officials for

Accepted Answer

A)   conspiring with Microsoft to ensure that Google and Microsoft products were bundled.
B)   using its 90 percent share of the Internet search market to favor its own price-comparison service.
C)   using pricing algorithms to price-fix with other Internet sellers.
D)   using its monopoly power to require all computers sold in Europe to support Google Chrome.E) A) and B)
F) B) and D)

Question 8

Laws and government actions designed to prevent monopoly and to promote competition are the focus of

Accepted Answer

A)   social regulation.
B)   industrial regulation.
C)   antitrust policy.
D)   incomes policy.E) A) and B)
F) C) and D)

Question 9

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 10

Suppose the transportation industry has been regulated for many years. Government now proposes to deregulate the industry, only to find that firms in the industry oppose this action. This is consistent with the

Accepted Answer

A)   public interest theory of regulation.
B)   theory of natural monopolies.
C)   legal cartel theory of regulation.
D)   Alcoa and U.S. Steel court decisions.E) C) and D)
F) B) and D)

Question 11

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 B)
F) C) and D)

Question 12

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) B) and D)
F) B) and C)

Question 13

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 themE) C) and D)
F) A) and B)

Question 14

Which of the following is not a major criticism of social regulation?

Accepted Answer

A)   It is anticompetitive.
B)   It will increase product prices.
C)   It will increase the rate of innovation in the economy.
D)   It will impose a larger burden on small firms compared to large firms.E) B) and D)
F) All of the above

Question 15

A merger between McDonald's and Burger King would be an example of a

Accepted Answer

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

Question 16

If the market is defined more narrowly to include only a more restricted range of products, then the Herfindahl index will

Accepted Answer

A)   increase.
B)   decrease.
C)   not be affected.
D)   either increase or decrease.E) All of the above
F) A) and B)

Question 17

The Consumer Product Safety Commission engages in social regulation, rather than industrial regulation.

Accepted Answer

A) True 
 B)False

Question 18

The effectiveness of regulation is sometimes criticized because

Accepted Answer

A)   regulators try to please everybody.
B)   of the high profits in regulated industries.
C)   regulators don't know how to regulate industries.
D)   regulators usually have been closely associated with the industries they regulate.E) A) and D)
F) A) and C)

Question 19

If the government regulates a natural monopoly and sets a "fair return" pricing policy, then the regulated firm will have greater incentive to improve its operating efficiency.

Accepted Answer

A) True 
 B)False

Question 20

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) A) and C)
F) A) and B)

Exam 21: Antitrust Policy and Regulation

Suppose the transportation industry has been regulated for many years. Government now proposes to deregulate the industry, only to find that firms in the industry oppose this action. This is consistent with the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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 U.S. Justice Department, the Federal Trade Commission, state attorneys general, and injured private parties can independently file charges against firms under the Sherman Act.

Correct AnswerverifiedShow Answer

Which of the following is not a major criticism of social regulation?

Correct AnswerverifiedShow Answer

The Consumer Product Safety Commission engages in social regulation, rather than industrial regulation.

Correct AnswerverifiedShow Answer

Proposed ergonomics regulations are an example of industrial regulation (rather than social regulation).

Correct AnswerverifiedShow Answer

If the government regulates a natural monopoly and sets a "fair return" pricing policy, then the regulated firm will have greater incentive to improve its operating efficiency.

Correct AnswerverifiedShow Answer

Critics of industrial regulation say that such regulation

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Critics of industrial regulation say that such regulation

Correct AnswerverifiedShow Answer

Suppose that two firms in an industry with a Herfindahl index of 5,000 announce a merger. The U.S. Justice Department concludes the merger will boost the index to 5,500. The antitrust authorities will most likely

Correct AnswerverifiedShow Answer

The effectiveness of regulation is sometimes criticized because

Correct AnswerverifiedShow Answer

A merger between McDonald's and Burger King would be an example of a

Correct AnswerverifiedShow Answer

If the market is defined more narrowly to include only a more restricted range of products, then the Herfindahl index will

Correct AnswerverifiedShow Answer

Which of the following beliefs is not strongly espoused by the "laissez-faire perspective" in antitrust policy?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Government regulation of firms' prices or "rates" in selected industries is the focus of

Correct AnswerverifiedShow Answer

(Last Word) In 2015, Google was indicted by European Union antitrust officials for

Correct AnswerverifiedShow Answer

Laws and government actions designed to prevent monopoly and to promote competition are the focus of

Correct AnswerverifiedShow Answer

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