Question 1

Regulation of business, according to the legal cartel theory, stems from

Accepted Answer

A)   the public wanting protection from potentially capricious firms.
B)   economists who see greater efficiency in regulated industries.
C)   lawyers whose jobs are more secure in cartels.
D)   firms wanting to be regulated in order to shut off competition.E) None of the above
F) A) and D)

Question 2

The principal objective of industrial regulation is to

Accepted Answer

A)   increase product safety.
B)   promote improvements in the quality of life.
C)   protect the consuming public from the market power of natural monopolies.
D)   solve problems associated with industry, such as the problems of water and air pollution.E) A) and B)
F) C) and D)

Question 3

Antitrust legislation in the United States in recent decades has

Accepted Answer

A)   been vigorously and consistently enforced.
B)   been uniformly ignored with respect to enforcement.
C)   varied between the extremes of being enforced and being ignored.
D)   destroyed the American dream for the nation's entrepreneurs.E) B) and C)
F) A) and D)

Question 4

In 2007 British Airlines and Korean Air were charged with which antitrust violation?

Accepted Answer

A)   monopoly structure
B)   price-fixing
C)   tying contracts
D)   dividing up the marketE) B) and C)
F) None of the above

Question 5

The "rule of reason" indicated that

Accepted Answer

A)   if less than four firms account for three-fourths of an industry's sales, the industry is in violation of the Sherman Act.
B)   social regulation should not be enforced unreasonably so that costs exceed benefits.
C)   the mere possession of monopoly power is a violation of the antitrust laws.
D)   only contracts and combinations that unreasonably restrain trade violate the antitrust laws.E) A) and D)
F) B) and D)

Question 6

Which of the following is correct?

Accepted Answer

A)   Vertical mergers are more likely to be acceptable under antitrust laws than are horizontal mergers.
B)   A vertical merger entails the merging of two or more competing firms.
C)   Horizontal mergers are more likely to be acceptable under antitrust laws than are vertical mergers.
D)   Conglomerate mergers occur when two or more firms at various stages in a good's production are combined.E) A) and D)
F) None of the above

Question 7

The regulation of natural monopolies has been criticized because it creates a tendency for regulated firms to use too much labor and too little capital in the production process.

Accepted Answer

A) True 
 B)False

Question 8

A merger that is neither horizontal nor vertical is called a

Accepted Answer

A)   tying merger.
B)   conglomerate merger.
C)   Herfindahl merger.
D)   natural merger.E) C) and D)
F) B) and C)

Question 9

Which of the following is not a true statement about how social regulation differs from industrial regulation?

Accepted Answer

A)   Social regulation applies to many industries across the board, whereas industrial regulation is more specific to one industry.
B)   Social regulation intrudes into the day-to-day production processes of companies more so than industrial regulation.
C)   Social regulation is enforced by state and local governments, whereas industrial regulation tends to be the domain of the federal government.
D)   Social regulation has expanded rapidly during the same period in which industrial regulation has waned.E) A) and D)
F) A) and C)

Question 10

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

Question 11

Which of the following is directly illegal under the Sherman Act?

Accepted Answer

A)   price discrimination
B)   tying contracts
C)   price-fixing
D)   interlocking directoratesE) A) and B)
F) None of the above

Question 12

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

Question 13

Social regulation consists of regulating the behavior of people in society in order to promote the safety and harmony in neighborhoods.

Accepted Answer

A) True 
 B)False

Question 14

An example of a government organization involved primarily in public regulation or industrial regulation of natural monopolies would be the

Accepted Answer

A)   Food and Drug Administration.
B)   Environmental Protection Agency.
C)   Federal Energy Regulatory Commission.
D)   Occupational Safety and Health Administration.E) A) and B)
F) A) and C)

Question 15

Which of the following gave the Federal Trade Commission responsibility to protect the public against false and misleading advertising?

Accepted Answer

A)   Celler-Kefauver Act of 1950
B)   Wheeler-Lea Act of 1938
C)   Clayton Act of 1914
D)   Sherman Act of 1890E) B) and C)
F) All of the above

Question 16

A firm charged with monopolizing a market is less likely to be convicted if

Accepted Answer

A)   the court accepts a broad definition of the market.
B)   the court accepts a narrow definition of the market.
C)   it has gained its monopoly through abusive means.
D)   it sells its product to other firms, rather than directly to consumers.E) B) and D)
F) C) and D)

Question 17

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) A) and B)
F) None of the above

Question 18

A firm is likely to be a natural monopoly

Accepted Answer

A)   when the demand for its product or service is inelastic.
B)   if it is producing an inferior good.
C)   if economies of scale are experienced over the full range of output.
D)   because government grants it an exclusive franchise.E) None of the above
F) C) and D)

Question 19

Critics of social regulation would argue that it

Accepted Answer

A)   decreases prices.
B)   increases output.
C)   increases competition.
D)   decreases product innovation.E) A) and D)
F) All of the above

Question 20

The U.S. Steel case of 1920 and the Alcoa case of 1945 dealt with which antitrust question?

Accepted Answer

A)   To what extent should firms be limited in buying plant and equipment from other firms?
B)   Should an industry be judged by its behavior or by its structure?
C)   Should the steel and aluminum industries be considered natural monopolies?
D)   Should mergers be permitted between firms in closely related industries?E) B) and D)
F) A) and B)

Exam 21: Antitrust Policy and Regulation

Which of the following is directly illegal under the Sherman Act?

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Antitrust legislation in the United States in recent decades has

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Which of the following is not a true statement about how social regulation differs from industrial regulation?

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Which of the following is correct?

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In 2007 British Airlines and Korean Air were charged with which antitrust violation?

Correct AnswerverifiedShow Answer

A merger that is neither horizontal nor vertical is called a

Correct AnswerverifiedShow Answer

Critics of social regulation would argue that it

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

Social regulation consists of regulating the behavior of people in society in order to promote the safety and harmony in neighborhoods.

Correct AnswerverifiedShow Answer

The regulation of natural monopolies has been criticized because it creates a tendency for regulated firms to use too much labor and too little capital in the production process.

Correct AnswerverifiedShow Answer

The "rule of reason" indicated that

Correct AnswerverifiedShow Answer

The principal objective of industrial regulation is to

Correct AnswerverifiedShow Answer

The basic issue in the DuPont cellophane case was

Correct AnswerverifiedShow Answer

A firm charged with monopolizing a market is less likely to be convicted if

Correct AnswerverifiedShow Answer

An example of a government organization involved primarily in public regulation or industrial regulation of natural monopolies would be the

Correct AnswerverifiedShow Answer

Which of the following gave the Federal Trade Commission responsibility to protect the public against false and misleading advertising?

Correct AnswerverifiedShow Answer

The U.S. Steel case of 1920 and the Alcoa case of 1945 dealt with which antitrust question?

Correct AnswerverifiedShow Answer

Regulation of business, according to the legal cartel theory, stems from

Correct AnswerverifiedShow Answer

A firm is likely to be a natural monopoly

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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