Econ 1B Finals Ch. 19

Which of the following amended the Clayton Act's prohibition against mergers that substantially lessen competition? A. Cellar-Kefauver Act of 1950. B. Wheeler-Lea Act of 1938. C. Clayton Act of 1914. D. Sherman Act of 1890.

A. Cellar-Kefauver Act of 1950.

Which one of the following is concerned with social regulation? A. Equal Employment Opportunity Commission. B. Feder Communications Commission. C. Sherman Commission. D. Federal Energy Regulatory Commission.

A. Equal Employment Opportunity Commission.

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

A. a horizontal merger between two of the industry's largest firm.

Which one of the following is not prohibited by the original Clayton Act? A. the purchase of stocks of rival firms that lessens competition. B. the purchase of the assets of rival firms that lessen competition. C. an exclusive deal or tying agreements that lessens competition. D. price discrimination that lessens competition.

B. the purchase of the assets or rival firms that lessens competition.

Responsibility for enforcing the antitrust laws rests: A. with the Interstate Commerce Commission. B. with both the Department of Justice and the Federal Trade Commission. C. solely with the Federal Trade Commission. D. solely with the Department of Justice.

B. with both the Justice Department and Federal Trade Commission.

Suppose the courts declare that XYZ Corporation violated the antitrust laws and as a result the ABC Corporation lost $100 million profits. XYZ Corporation will have to pay ABC Corporation a monetary award of: A. $100 million. B. $33.3 million. C. $150 million. D. $300 million

D. $300 million

Which of the following characteristics of a regulated natural monopoly? A. extensive economies of scale. B. the wasteful duplication of capital facilities in the event of competition. C. the provision of an essential service. D. All of these.

D. All of these.

Social, as distinct from industrial, regulation is the major focus of the A Federal Trade Commission. B. Federal Energy Regulatory Commission. C. Federal Communications Commission. D. Consumer Product Safety Commission.

D. Consumer Product Safety Commission.

Structuralists take the position that: A. the rule of reason is appropriate and desirable in interpreting the Sherman Act. B. only unreasonable anticompetitive acts should be regarded as violations of the antitrust laws. C. industries should be judged on the basis of their technological progress and their price-output behavior D. an industry that is highly concentrated will behave monopolistically.

D. an industry that is highly concentrated will behave monopolistically.

Conspiracies to fix prices are: A. illegal under the Clayton Act. B. illegal under the Cellar-Kefauver Act. C. per se violation of the antitrust laws. D. more tolerated by the government today than two or three decades ago.

C. per se violation of the antitrust laws.

Which of the following is directly illegal under the Sherman Act? A. price discrimination. B. tying contracts. C. price-fixing. D. interlocking directorates.

C. price-fixing.

Which of the following acts declare "[e]very contract, combination... or conspiracy, in restraint of trade or commerce among the several states... to be illegal"? A. the Wheeler-Lea Act. B. the Federal Trade Commission Act. C. the Sherman Act. D. the Interstate Commerce Act.

C. the Sherman Act.

The public interest theory of industrial regulation contends that: A. while industrial regulation is sound in theory, bureaucrats allow monopolists to obtain excessive profits. B. regulated monopolies are tantamount to legal cartels. C. the objective of regulation is to protect the public from the market power inherent in natural monopolies. D. firms in some industries want to be regulated.

C. the objective of regulation is to protect the public from the market power inherent in natural monopolies.

The main purpose of the antitrust law is: A. to encourage firms to produce where P>MC. B. the elimination of both negative and positive externalities. C. to prevent the monopolization of industries. D. to regulate natural monopolies.

C. to prevent the monopolization of industries.

A merger between automobile manufacturer and a maker of automobile tires is an example of a: A. conglomerate merger. B. horizontal merger. C. vertical merger. D. tying contract.

C. vertical merger.

The optimal amount of social regulation occurs where the marginal benefit of such regulation: A. equals the marginal cost. B. exceed the marginal cost by the greatest amount. C. is zero. D. is at its maximum.

A. equals the marginal cost.

Suppose that two firms in an industry 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: A. ignore this merger because of the relative small size, 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.

A. ignore this merger because of the relative small size, and increase in, the Herfindahl index.

The Clayton Act of 1914: A. outlawed price discrimination, tying contracts, acquisition of stocks of competing corporations, and interlocking directories that lessen competitions. B. prohibited unfair or deceptive acts or practices in commerce that tend to reduce competition. C. outlawed vertical and conglomerate mergers. D. prohibited one firm from acquiring the assets of another when the effect was to limit competition.

A. outlawed price discrimination, tying contracts, acquisition of stock of competing corporations, and interlocking directorates that lessen competition.

Social regulation differs from industrial regulation in that: A. social regulation applies to virtually all industries while industrial regulation applies to a restricted number. B. industrial regulation is involved in the details of the production process, while social regulation is not. C. social regulation has expanded less rapidly in recent years than has industrial regulation. D. industrial regulation regulates products whereas social regulation regulates prices.

A. social regulation applies to virtually all industries, while industrial regulation applies to a restricted number.

The antitrust laws are enforced by the: A. Federal Bureau of Investigation. B. Antimonopoly Court of Appeals. C. Federal Justice Department and the Federal Trade Commission. D. Department of Commerce.

C. Federal Justice Department and the Federal Trade Commission.

Where there is natural monopoly, government is most likely to implement. A. social regulation. B. antitrust policy. C. industrial regulation. D. an externality containment policy.

C. industrial regulation.

Critics of social regulation argue that it: A. causes deflation. B. violates the due process clauses of the U.S. Constitution. C. is a relatively greater burden for small firms than for large firms. D. improves allocative efficiency.

C. is a relatively greater burden for small firms than for large firms.

The view that the antitrust laws should be enforced relatively leniently because the tendency for a monopoly power to erode over time is known as the: A. structuralist view of antitrust. B. behavioralist view of antitrust. C. laissez-faire perspective on antitrust. D. active antitrust perspective.

C. laissez-faire perspective on antitrust.

Using antitrust law to split up an unregulated natural monopoly into several competing firms: A. would reduce produce price. B. would increase product price. C. might either increase product price or reduce product price. D. will reduce average total cost.

C. might either increase product price or reduce product price.

A vertical merger involves a combining of one or more firms: A. as a 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 the same stage of the production process.

C. operating at different stages of the production process in a particular industry.

Movie producers A, B, and C secretly meet and agree to release their summer blockbuster films in sequence, rather than at the same time. The U.S. Justice Department learns of the agreement and files an antitrust suit. The federal government would most likely file chargers under the: A. Sherman Act, Section 1. B. Sherman Act Section 2. C. Clayton Act. D. Federal Trade Commission Act.

A. Sherman Act, Section 1.

Antitrust authorities are least likely to take action against: A. conglomerate mergers. B. horizontal mergers. C. interlocking directorates. D. price-fixing.

A. conglomerate mergers.

Critics of industrial regulation say that such regulation: 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.

A. contributes to X-inefficiency.

The Sherman Act: A. was declared unconstitutional in 1895. B. provided for government regulation of the railroads. C. declared monopoly and restraint of trade to be illegal. D. exempted the railroad and communications industries from the antitrust laws.

C. declared monopoly and restraint of trade to be illegal.

Critics of the regulation of natural monopolies contend that: 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.

D. the industry may "capture" or control the regulatory commission.

A merger between makers of household detergents and a fast-food chain would be an example of: A. a horizontal merger. B. an interlocking directorate. C. a conglomerate merger. D. a tying contract.

C. a conglomerate merger.

Suppose Slow Ketchup requires that, as a condition of purchase, all restaurants using its product must buy and make available its new sales product. This arrangement is an example of: A. price-fixing. B. interlocking directives. C. a tying contract. D. price discrimination.

C. a tying contracts.

The Cellar-Kefauver Act of 1950: A. outlawed price-fixing. B. amended the Sherman Act. C. amended the Clayton Act. D. created the Civil Aeronautics Board (CAB).

C. amended the Clayton Act.

All of the following are regulatory commissions dealing with industrial regulations (as distinct from social regulations) except the: A. Food and Drug Administration. B. Federal Energy Regulatory Commission. C. Federal Communication Comission. D. 50 state public utility commssions.

A. Food and Drug Administration.

A function of the Federal Trade Commission is to: 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.

A. investigate instances of faulty and misleading advertising.

The Federal Trade Commission: 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.

A. is empowered to hold public hearings to investigate unfair practices.

A firm charged with monopolizing a market is less likely to be convicted if: 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 though abusive means. D. it sells its product to other firms, rather than directly to consumers.

A. the court accepts a broad definition of the market.

Which of the following is correct? A. vertical mergers are more likely to be accepted under antitrust laws than are horizontal mergers. B. a vertical merger entails the merging of the two or more competing firms. C. horizontal mergers are more likely to be accepted 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.

A. vertical mergers are more likely to be accepted under the antitrust laws than are horizontal mergers.

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: A. 1,900. B. 2,400. C. 90. D. 10,000.

B. 2,400.

Tying contracts are illegal under the: A. Wagner Act of 1935. B. Clayton Act of 1914. C. FTC Act of 1914. D. Cellar-Kefauver Act of 1950.

B. Clayton Act of 1914.

Behavioralists believe that: A. if four or fewer firms control more than half of thee 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.

B. industries should be judged on the basis of their price-output behavior and their technological progressiveness.

Price-fixing: A. is prohibited by Section 7 of the Clayton Act. B. is a per se violation of the antitrust laws. C. may be either legal or illegal depending on whether or not it produces above-normal profits. D. is illegal under terms of the Federal Trade Commission Act.

B. is a per se violation of the antitrust laws.

Which of the following laws prohibit mergers by acquisition if the effect was to lessen competition? A. Cellar-Kefauver Act of 1950. B. Wheeler-Lea Act of 1938. C. Clayton Act of 1914. D. Sherman Act of 1980.

C. Clayton Act of 1914.

Which one of the following is concerned with industrial regulation, as distinct from social regulations? A. Occupational Safety and Health Administration. B. Consumer Products Safety Commission. C. Federal Communications Commission. D. Environmental Protection Agency.

C. Federal Communications Commission.

Which of the following is not correct? A. in antitrust cases defendants attempt to define the relevant market broadly. B. the courts have varied over time in their interpretations of the antitrust statutes. C. antitrust suits can only be originated by the Federal Trade Commission. D. in antitrust cases the prosecution attempts to define the relevant market narrowly.

C. antitrust suits can only be originated by the Federal Trade Commission.

A major criticism of industrial regulation is that: A. it has been applied to virtually all major U.S. corporations in the post-Second World War period. B. marginal cost pricing has created an underallocation of resources. C. by allowing a fair return price, it gives natural monopolists little incentive to contain costs. D. regulatory commissions have frequently caused natural monopolies to go bankrupt.

C. by allowing a fair return price, it gives natural monopolists little incentives to contain costs.

Overall, economists believe that deregulation of industries formerly subjected to industrial regulation: A. has been a clear failure. B. is neutral in its impact to 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).

C. has produced large net benefits for consumers and society.

Which of the following made monopoly and restraint of trade criminal offenses against the federal government? A. Cellar-Kefauver Act of 1950. B. Wheeler-Lea Act of 1938. C. Clayton Act of 1914. D. Sherman Act of 1890.

D. Sherman Act of 1890.

Price-fixing is considered to be a per se violation of the antitrust laws because: A. a guilty verdict requires proof of injury to consumer. B. a guilty verdict requires proof of injury to other competitors. C. the rule of reason is applicable. D.a guilty verdict need only show that there was a conspiracy to fix prices, not that it succeeded.

D. a guilty verdict need only show that there was a conspiracy to fix prices, not that it succeeded.

Which of the following is most likely to increase the Herfindahl index of a particular industry? A. a conglomerate merger. B. a vertical merger. a price-fixing arrangement among all the industry firms. D. a horizontal merger.

D. a horizontal merger.

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: A. structuralist view of antitrust. B. behavioralist view of antitrust. C. laissez-faire perspective on antitrust. D. active antitrust perspective.

D. active antitrust perspective

the largest efficiency gain from deregulation have occurred in the: A. natural gas and cable television industries. B. cable television and railroad industries. C. communications and stock-brokering industries. D. airlines, trucking, and railroad industries.

D. airlines, trucking , and railroad industries.

Interlocking directorates are: A. legal if the two firms have small market shares. B. illegal under provisions of the Federal Trade Commission Act of 1914. C. illegal under provisions of the Cellar-Kefauver Act of 1950. D. illegal under the provision of the Clayton Act of 1914.

D. illegal under the provision of the Clayton Act of 1914.

The Sherman Act was designed to: A. exempt commercial banks from the antitrust laws. B. make interlocking directorates legal. C. prohibit misleading and antisocial advertising. D. make monopoly and acts restrain trade illegal.

D. make monopoly and acts restrain trade illegal.

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: 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.

C. legal cartel theory of regulation.

A conglomerate merger: A. can extend the line of products sold, extend the territories in which products are sold, or combine totally unrelated products. B. is defined as a merger involving two firms that previously had a buyer-seller relationship.s C. is defined as a merger involving two firms producing the same or similar products and selling them in the same geographical market. D. is illegal, per se.

A. can extend the line of products sold, extend the territories in which products are sold, or combine totally unrelated products.

Which of the following gave the federal Trade Commission responsibility to protect the public against false and misleading advertising? A. Cellar-Kefauver Act of 1950. B. Wheeler-Lea Act of 1914. C. Clayton Act of 1914. D. Sherman Act of 1890.

B. Wheeler-Lea Act of 1938

A merger of several firms operating in different industries- for example, a trucking company, a fast-food chain, and brokerage house- is called: A. an integrated merger. B. a conglomerate merger. C. a vertical merger. D. a horizontal merger.

B. a conglomerate merger.

Which of the following findings would be the most likely to lead the U.S. Justice Department to block a corporate merger under terms of the Clayton Act? A. a buyer-seller relationship between the two firms. B. a high premerger Herfindahl index in the industry and a large boost in the index because of the merger. C. a low pre- and post-merger concentration ratio in the industry. D. evidence that one of the firms is highly unprofitable.

B. a high premerger Herfindahl index in the industry and a large boost in the index because of the merger.

Defenders of social regulation point out that: A. social regulation is a better alternative than unregulated natural monopoly. B. critics who stress the high administrative and compliance costs of social regulation underestimate the social benefits that the regulation produce. C. the number of regulatory agency has declined over the past two decades. D. social regulations reduce product prices.

B. critics who stress the high administrative and compliance costs of social regulation underestimate the social benefits that regulation produce.

Which of the following is least likely to violate the Sherman Act or the Clayton Act? A. competitive firms A, B, and C meet and agree to charge a common price. B. competitive firms D and E, each with 35 percent market shares, merge into a single firm. C. competitive firms F and G independently charge low prices to frequent customers than to occasional customers. D.large dominant firm H forces buyers to purchase its product X in order to buy its popular product Y.

C. competitive firms F and G independently charge lower prices to frequent customers than to occasional customers.

A firm is likely to be a natural monopoly: 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.

C. if economies of scale are experienced over the full range of output.

The "rule of reason" indicated that: 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.

D. only contracts and combinations that unreasonable restrain trade violate the antitrust laws.

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 most likely: A. ignore this merger because of the relative small increase in the Herfindahl index. B. allow the merger but watch the new firm carefully for future violation 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.

D. prevent the merger, contending that it violates the Clayton Act.

Congressional representatives have called for extensive ergonomics regulations to reduce strains and injuries from repetitive activities by workers. Such regulation, if passed, would be a good example of: A. industrial regulation. B. the principal-agent problem. C. the free-rider problem. D. social regulation.

D. social regulation.

All of the following can file antitrust charges under the Sherman Act except: A. the U.S. Justice Department. B. state attorneys general. C. injured private parties. D. the Federal Energy Regulatory Commission.

D. the Federal Energy Regulatory Commission.

Economists who adhere to the laissez-fair antitrust perspective: A. view competition as 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.

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.

The legal cartel theory of regulation argues that: A. regulation encourages firms to inflate their production costs. B. firms in certain industries want to be regulated rather than face the rigors of competition. C. social regulations has been carried beyond the point at which marginal benefits and marginal costs are equal. D. the government is the logical agency to protect consumers from natural monopolies.

B. firms in certain industries want to be regulated rather than face the rigors of competition.

The antitrust laws are based on the: 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.

B. idea that competition leads to greater economic efficiency than does a monopoly.

The main purpose of industrial regulation is to: A. lower price to marginal cost. B. lower price to average total cost such that the firm earns a fair return. C. break monopolies into competing firms. D. reduce X-inefficiency.

B. lower price to average total cost such that the firm earns a fair return.

A market in which the entire demand for a good or service can be satisfied at least cost by a single firm is a A. horizontal market. B. natural monopoly. C. contestable market. D. perfect market.

B. natural monopoly.

Tying agreements: 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.

B. obligate a purchaser of product X to also buy product Y from the same seller.

Critics of industrial regulation say that such regulation: A. benefits small firms at the expense of large firms. B. perpetuates monopoly long after new technology as eroded natural monopoly. C. creates insurmountable principal-agent problems. D. has resulted mainly from the paradox of voting.

B. perpetuates monopoly long after new technology has eroded natural monopoly.

The Cellar-Kefauver Act of 1950: A. modified patent legislation by reducing the number of years over which a patent is applicable. B. prohibited any firm from acquiring the real assets of another firm where the effect was to lessen competition. C. declared all conglomerate mergers to be illegal. D. prohibited any firm from buying the stock of another firm where the effect is to lessen competition.

B. prohibited any firm from acquiring the real assets of another firm where to effect was to lessen competition.