Question 1

Suppose the courts declare that XYZ Corporation violated the antitrust laws and as a result ABC Corporation lost $100 million of profits. XYZ Corporation will have to pay ABC Corporation a monetary award of

Accepted Answer

A)   $100 million.
B)   $33.3 million.
C)   $150 million.
D)   $300 million.E) A) and B)
F) B) and D)

Question 2

Using antitrust law to split up an unregulated natural monopoly into several competing firms

Accepted Answer

A)   would reduce product price.
B)   would increase product price.
C)   might either increase product price or reduce product price.
D)   would reduce average total cost.E) A) and B)
F) A) and C)

Question 3

Social regulation differs from industrial regulation in that

Accepted Answer

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.E) B) and C)
F) A) and B)

Question 4

The rule of reason in antitrust applications means that if a firm has a dominant share of the market, it stands to reason that it will exploit its monopoly power to gain an unfair advantage over its rivals.

Accepted Answer

A) True 
 B)False

Question 5

Intel's monopoly in the sale of microchips for personal computers would be considered

Accepted Answer

A)   legal by "behavioralists" but illegal by "structuralists."
B)   legal by "behavioralists" and "structuralists."
C)   illegal by "behavioralists" and "structuralists."
D)   illegal by "behavioralists" but legal by "structuralists."E) B) and D)
F) None of the above

Question 6

According to the legal cartel theory of regulation, firms desire to have government regulation because it protects them from competition.

Accepted Answer

A) True 
 B)False

Question 7

The legal cartel theory of regulation argues that

Accepted Answer

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 regulation 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.E) A) and B)
F) B) and C)

Question 8

Using the Internet, some firms are now employing software that uses pricing algorithms to constantly adjust their online prices in response to what rivals are charging for similar products. This is making it easier for the

Accepted Answer

A)   firms to collude tacitly in their pricing schemes.
B)   government to prove price-fixing.
C)   firms to gain monopoly power over their rivals.
D)   government to enforce industrial regulation.E) A) and B)
F) None of the above

Question 9

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) All of the above
F) A) and B)

Question 10

If economies of scale in an industry are so extensive that a single firm could serve the entire market at a lower cost than if the market was split between two or more firms, this industry is called a(n)

Accepted Answer

A)   conglomerate
B)   natural monopoly.
C)   oligopoly.
D)   restraint of trade.E) B) and C)
F) C) and D)

Question 11

Price-fixing

Accepted Answer

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

Question 12

The public interest theory of regulation

Accepted Answer

A)   says that industries should be regulated to insure quality service at reasonable prices.
B)   says higher costs may not be passed through to consumers.
C)   protects industries from new competition.
D)   guarantees higher rates for natural monopolies.E) B) and D)
F) A) and D)

Question 13

Interlocking directorates refers to a situation where

Accepted Answer

A)   a director of one firm is also a board member of a competing firm.
B)   members of the board of directors of a firm could not agree on a clear strategy for the firm.
C)   competing firms have separate and different members in their boards.
D)   a company's board splits into two rival camps locked in constant struggle.E) None of the above
F) All of the above

Question 14

Which one of the following is not prohibited by the original Clayton Act?

Accepted Answer

A)   the purchase of the stocks of rival firms that lessens competition
B)   the purchase of the assets of rival firms that lessens competition
C)   an exclusive dealer or tying agreements that lessen competition
D)   price discrimination that lessens competitionE) B) and D)
F) B) and C)

Question 15

The Celler-Kefauver Act made vertical mergers legal, provided each firm does not have more than 30 percent of its relevant market.

Accepted Answer

A) True 
 B)False

Question 16

One main difference in the rulings on the 1945 Alcoa case and the 1956 DuPont cellophane case is that the Alcoa case

Accepted Answer

A)   focused on structure, whereas the DuPont case focused on behavior.
B)   focused on behavior, whereas the DuPont case focused on structure.
C)   defined the market broadly, whereas the DuPont case defined the market narrowly.
D)   defined the market narrowly, whereas the DuPont case defined the market broadly.E) B) and C)
F) A) and D)

Question 17

Which of the following has tended to reduce the importance of antitrust law, according to some economists?

Accepted Answer

A)   industrial policy
B)   conglomerate mergers
C)   the rule of reason decision
D)   rapidly changing technologyE) A) and B)
F) A) and C)

Question 18

Responsibility for enforcing the antitrust laws rests

Accepted Answer

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

Question 19

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 B)
F) B) and C)

Question 20

(Last Word)  In 1994, the U.S. Department of Justice stopped which of the following practices?

Accepted Answer

A)   airlines explicitly agreeing to divide the market so that each carrier could have a local monopoly
B)   airlines preposting fare changes as a form of tacit collusion
C)   Microsoft using its monopoly power to coerce computer manufacturers to favor Internet Explorer over rival browsers
D)   price-fixing by Japanese, German, and Swedish auto parts makersE) None of the above
F) All of the above

Exam 21: Antitrust Policy and Regulation

Using antitrust law to split up an unregulated natural monopoly into several competing firms

Correct AnswerverifiedShow Answer

The Celler-Kefauver Act made vertical mergers legal, provided each firm does not have more than 30 percent of its relevant market.

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Intel's monopoly in the sale of microchips for personal computers would be considered

Correct AnswerverifiedShow Answer

Interlocking directorates refers to a situation where

Correct AnswerverifiedShow Answer

Suppose the courts declare that XYZ Corporation violated the antitrust laws and as a result ABC Corporation lost $100 million of profits. XYZ Corporation will have to pay ABC Corporation a monetary award of

Correct AnswerverifiedShow Answer

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

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The public interest theory of regulation

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The rule of reason in antitrust applications means that if a firm has a dominant share of the market, it stands to reason that it will exploit its monopoly power to gain an unfair advantage over its rivals.

Correct AnswerverifiedShow Answer

Responsibility for enforcing the antitrust laws rests

Correct AnswerverifiedShow Answer

According to the legal cartel theory of regulation, firms desire to have government regulation because it protects them from competition.

Correct AnswerverifiedShow Answer

One main difference in the rulings on the 1945 Alcoa case and the 1956 DuPont cellophane case is that the Alcoa case

Correct AnswerverifiedShow Answer

Using the Internet, some firms are now employing software that uses pricing algorithms to constantly adjust their online prices in response to what rivals are charging for similar products. This is making it easier for the

Correct AnswerverifiedShow Answer

Which of the following has tended to reduce the importance of antitrust law, according to some economists?

Correct AnswerverifiedShow Answer

Price-fixing

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Which one of the following is not prohibited by the original Clayton Act?

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(Last Word) In 1994, the U.S. Department of Justice stopped which of the following practices?

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The legal cartel theory of regulation argues that

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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

If economies of scale in an industry are so extensive that a single firm could serve the entire market at a lower cost than if the market was split between two or more firms, this industry is called a(n)

Correct AnswerverifiedShow Answer

Social regulation differs from industrial regulation in that

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