Question 1

The Robinson-Patman Act of 1936

Accepted Answer

A) made conspiracy in the restraint of trade illegal. 
B) made price discrimination, exclusive dealing, tying contracts, and the acquisition of competing companies' stock illegal when they "substantially lessen competition or tend to create a monopoly." 
C) declared "unfair methods of competition in commerce" illegal. 
D) attempted to decrease the failure rate of small businesses by protecting them from the competition of large and growing chain stores. 
E) banned anticompetitive mergers that occurred as a result of one company acquiring the physical assets of another company. 
A) made conspiracy in the restraint of trade illegal. 
B) made price discrimination, exclusive dealing, tying contracts, and the acquisition of competing companies' stock illegal when they "substantially lessen competition or tend to create a monopoly." 
C) declared "unfair methods of competition in commerce" illegal. 
D) attempted to decrease the failure rate of small businesses by protecting them from the competition of large and growing chain stores. 
E) banned anticompetitive mergers that occurred as a result of one company acquiring the physical assets of another company.

Question 2

The capture theory of regulation implicitly holds that

Accepted Answer

A) the members of a regulated industry have a stronger incentive to attend regulatory meetings than taxpayers and consumers. 
B) regulators will always do what they think is in the public's best interest. 
C) regulatory lag is often longer than most people think. 
D) b and c 
E) a, b, and c 
A) the members of a regulated industry have a stronger incentive to attend regulatory meetings than taxpayers and consumers. 
B) regulators will always do what they think is in the public's best interest. 
C) regulatory lag is often longer than most people think. 
D) b and c 
E) a, b, and c

Question 3

Exhibit 25-40
​
  
-Refer to Exhibit 25-4. The profits of an unregulated natural monopoly that becomes regulated on the basis of marginal-cost pricing would

Accepted Answer

A) increase substantially. 
B) decrease substantially, but remain positive. 
C) be brought down to zero. 
D) become negative. 
A) increase substantially. 
B) decrease substantially, but remain positive. 
C) be brought down to zero. 
D) become negative.

Question 4

The act that was passed in an attempt to decrease the failure rate of small businesses by protecting them from the competition of large and growing chain stores was the

Accepted Answer

A) Wheeler-Lea Act. 
B) Robinson-Patman Act. 
C) Celler-Kefauver Antimerger Act. 
D) Clayton Act. 
E) Sherman Act. 
A) Wheeler-Lea Act. 
B) Robinson-Patman Act. 
C) Celler-Kefauver Antimerger Act. 
D) Clayton Act. 
E) Sherman Act.

Question 5

The Celler-Kefauver Antimerger Act of 1950

Accepted Answer

A) made interlocking directorates illegal. 
B) banned anticompetitive mergers that occurred as a result of one company acquiring the physical assets of another company. 
C) attempted to decrease the failure rate of small businesses by protecting them from the competition of large and growing chain stores. 
D) both a and b 
E) all of the above 
A) made interlocking directorates illegal. 
B) banned anticompetitive mergers that occurred as a result of one company acquiring the physical assets of another company. 
C) attempted to decrease the failure rate of small businesses by protecting them from the competition of large and growing chain stores. 
D) both a and b 
E) all of the above

Question 6

The statement, "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons to monopolize any part of the trade or commerce...shall be guilty of a misdemeanor" is a part of the

Accepted Answer

A) Clayton Act. 
B) Robinson-Patman Act. 
C) Sherman Act. 
D) Wheeler-Lea Act. 
E) none of the above 
A) Clayton Act. 
B) Robinson-Patman Act. 
C) Sherman Act. 
D) Wheeler-Lea Act. 
E) none of the above

Question 7

The Cellar-Kefauver Antimerger Act of 1950 was designed to

Accepted Answer

A) prevent one company from acquiring another company's stock if the acquisition reduces competition. 
B) prevent one company from acquiring another company's physical assets if the acquisition reduces competition. 
C) require that pending mergers be reported in advance to the Federal Trade Commission and the Justice Department. 
D) prevent price discrimination, exclusive dealing, and tying contracts. 
E) prevent interlocking directorates. 
A) prevent one company from acquiring another company's stock if the acquisition reduces competition. 
B) prevent one company from acquiring another company's physical assets if the acquisition reduces competition. 
C) require that pending mergers be reported in advance to the Federal Trade Commission and the Justice Department. 
D) prevent price discrimination, exclusive dealing, and tying contracts. 
E) prevent interlocking directorates.

Question 8

"To understand the decisions of regulatory bodies, you must first understand how the decisions affect the regulators themselves." The person who made this statement probably believes in the __________ theory of regulation.

Accepted Answer

A) capture 
B) public interest 
C) social interest 
D) public choice 
E) none of the above 
A) capture 
B) public interest 
C) social interest 
D) public choice 
E) none of the above

Question 9

If two firms in the same industry (but at different stages of the production process) merged, this would be a(n) __________ merger.

Accepted Answer

A) vertical 
B) conglomerate 
C) horizontal 
D) antitrust 
E) none of the above 
A) vertical 
B) conglomerate 
C) horizontal 
D) antitrust 
E) none of the above

Question 10

Which of the following is not a realistic scenario faced by government regulators of a natural monopoly?

Accepted Answer

A) The monopolist may have an incentive to prevent the regulators from learning the true costs of production. 
B) The monopolist may want to give the regulators information on the costs of production but may not have it to give. 
C) The regulators may not care whether the monopolist gives them the true costs of production. 
D) Any cost information that is given to the regulators may be outdated by the time the regulators act on it. 
E) All of the above are realistic. 
A) The monopolist may have an incentive to prevent the regulators from learning the true costs of production. 
B) The monopolist may want to give the regulators information on the costs of production but may not have it to give. 
C) The regulators may not care whether the monopolist gives them the true costs of production. 
D) Any cost information that is given to the regulators may be outdated by the time the regulators act on it. 
E) All of the above are realistic.

Question 11

The capture theory of regulation holds that

Accepted Answer

A) regulators try to capture as much "profit" (for themselves) from the regulatory process as possible. 
B) the special interests that are being regulated will eventually capture and control the regulatory body that "regulates" them. 
C) the public usually captures the regulatory body and makes it do what it wants. 
D) the courts usually capture the regulatory body and force it to do what is in the public's best interest. 
E) none of the above 
A) regulators try to capture as much "profit" (for themselves) from the regulatory process as possible. 
B) the special interests that are being regulated will eventually capture and control the regulatory body that "regulates" them. 
C) the public usually captures the regulatory body and makes it do what it wants. 
D) the courts usually capture the regulatory body and force it to do what is in the public's best interest. 
E) none of the above

Question 12

If there are five firms in an industry and the market shares of the firms are 45 percent, 22 percent, 17 percent, 10 percent and 6 percent. The four-firm concentration ratio for this industry is __________________ percent and the Herfindahl Index is ________________.

Accepted Answer

A) 90; 3,300 
B) 94; 2,898 
C) 94; 2,934 
D) 86; 9,216 
E) This information cannot be determined from the data given. 
A) 90; 3,300 
B) 94; 2,898 
C) 94; 2,934 
D) 86; 9,216 
E) This information cannot be determined from the data given.

Question 13

A local government prevents any firm from competing with a natural monopoly firm. Those people who believe this is a wise policy action would likely say

Accepted Answer

A) this is a desirable state of affairs since if competition is allowed, the natural monopoly firm will out compete all newcomers and in the end the newcomers will go out of business. 
B) the public doesn't want more than one company to produce certain goods that it buys. 
C) the first company that provides a certain good to the public should have the right to produce that good without competition from others. 
D) if competition is allowed, no firm in the industry will be able to earn profits. 
E) none of the above 
A) this is a desirable state of affairs since if competition is allowed, the natural monopoly firm will out compete all newcomers and in the end the newcomers will go out of business. 
B) the public doesn't want more than one company to produce certain goods that it buys. 
C) the first company that provides a certain good to the public should have the right to produce that good without competition from others. 
D) if competition is allowed, no firm in the industry will be able to earn profits. 
E) none of the above

Question 14

There are ten firms in an industry. Five of the firms each have a market share of 13 percent and five of the firms each have a market share of 7 percent. The Herfindahl index is

Accepted Answer

A) 1,040. 
B) 1,090. 
C) 100. 
D) 920. 
E) none of the above 
A) 1,040. 
B) 1,090. 
C) 100. 
D) 920. 
E) none of the above

Question 15

The advantage of the Herfindahl index over the four- and eight-firm concentration ratios is that it provides information

Accepted Answer

A) on the degree to which foreign firms impact domestic competition. 
B) about the dispersion of firm size in an industry. 
C) on the degree to which marginal revenue is greater than marginal cost (for a firm). 
D) b and c 
E) none of the above 
A) on the degree to which foreign firms impact domestic competition. 
B) about the dispersion of firm size in an industry. 
C) on the degree to which marginal revenue is greater than marginal cost (for a firm). 
D) b and c 
E) none of the above

Question 16

The Sherman Act of 1890 was passed with the intent of

Accepted Answer

A) establishing the Federal Trade Commission (FT
C)  to deal with "unfair methods of competition." 
B) preventing monopolization and/or conspiracy in the restraint of trade. 
C) spelling out the conditions under which mergers would be considered anti-competitive. 
D) dealing with false and deceptive advertising. 
E) declaring interlocking directorates illegal. 
A) establishing the Federal Trade Commission (FT
C)  to deal with "unfair methods of competition." 
B) preventing monopolization and/or conspiracy in the restraint of trade. 
C) spelling out the conditions under which mergers would be considered anti-competitive. 
D) dealing with false and deceptive advertising. 
E) declaring interlocking directorates illegal.

Question 17

The Justice Department considers a Herfindahl index less than __________ to be representative of an unconcentrated (competitive) industry.

Accepted Answer

A) 1,000 
B) 2,000 
C) 1,500 
D) 1,800 
A) 1,000 
B) 2,000 
C) 1,500 
D) 1,800

Question 18

The Clayton Act of 1914

Accepted Answer

A) made interlocking directorates illegal. 
B) set up the Federal Trade Commission (FT
C)  to deal with "unfair methods of competition." 
C) made monopolization of trade a misdemeanor. 
D) prohibited suppliers from offering special discounts to large chain stores without offering them to everyone else. 
E) empowered the FTC to deal with false and deceptive acts or practices. 
A) made interlocking directorates illegal. 
B) set up the Federal Trade Commission (FT
C)  to deal with "unfair methods of competition." 
C) made monopolization of trade a misdemeanor. 
D) prohibited suppliers from offering special discounts to large chain stores without offering them to everyone else. 
E) empowered the FTC to deal with false and deceptive acts or practices.

Question 19

What is the Herfindahl index of an industry made up of ten equal-sized firms?

Accepted Answer

A) 1,800 
B) 10,000 
C) 100 
D) 1,000 
A) 1,800 
B) 10,000 
C) 100 
D) 1,000

Question 20

Network goods such as telephones, computer operating systems and the like, will tend to become monopolies because consumers will naturally tend to buy from the largest supplier of the good. who will eventually become a monopoly. This monopoly position

Accepted Answer

A) automatically violates the Sherman Antitrust Act 
B) violates the Sherman Antitrust Act only if the company illegally acts to maintain their position 
C) is automatically subject to FTC or state regulation and does not fall under the Sherman Antitrust Act 
D) is not covered by the Sherman Antitrust Act 
A) automatically violates the Sherman Antitrust Act 
B) violates the Sherman Antitrust Act only if the company illegally acts to maintain their position 
C) is automatically subject to FTC or state regulation and does not fall under the Sherman Antitrust Act 
D) is not covered by the Sherman Antitrust Act

Exam 25: Government and Product Markets Antitrust and Regulation

The Robinson-Patman Act of 1936

The capture theory of regulation implicitly holds that

Exhibit 25-40 ​ -Refer to Exhibit 25-4. The profits of an unregulated natural monopoly that becomes regulated on the basis of marginal-cost pricing would

The act that was passed in an attempt to decrease the failure rate of small businesses by protecting them from the competition of large and growing chain stores was the

The Celler-Kefauver Antimerger Act of 1950

The statement, "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons to monopolize any part of the trade or commerce...shall be guilty of a misdemeanor" is a part of the

The Cellar-Kefauver Antimerger Act of 1950 was designed to

"To understand the decisions of regulatory bodies, you must first understand how the decisions affect the regulators themselves." The person who made this statement probably believes in the __________ theory of regulation.

If two firms in the same industry (but at different stages of the production process) merged, this would be a(n) __________ merger.

Which of the following is not a realistic scenario faced by government regulators of a natural monopoly?

The capture theory of regulation holds that

If there are five firms in an industry and the market shares of the firms are 45 percent, 22 percent, 17 percent, 10 percent and 6 percent. The four-firm concentration ratio for this industry is __________________ percent and the Herfindahl Index is ________________.

A local government prevents any firm from competing with a natural monopoly firm. Those people who believe this is a wise policy action would likely say

There are ten firms in an industry. Five of the firms each have a market share of 13 percent and five of the firms each have a market share of 7 percent. The Herfindahl index is

The advantage of the Herfindahl index over the four- and eight-firm concentration ratios is that it provides information

The Sherman Act of 1890 was passed with the intent of

The Justice Department considers a Herfindahl index less than __________ to be representative of an unconcentrated (competitive) industry.

The Clayton Act of 1914

What is the Herfindahl index of an industry made up of ten equal-sized firms?

Network goods such as telephones, computer operating systems and the like, will tend to become monopolies because consumers will naturally tend to buy from the largest supplier of the good. who will eventually become a monopoly. This monopoly position

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Exhibit 25-40 -Refer to Exhibit 25-4. The profits of an unregulated natural monopoly that becomes regulated on the basis of marginal-cost pricing would

If there are five firms in an industry and the market shares of the firms are 45 percent, 22 percent, 17 percent, 10 percent and 6 percent. The four-firm concentration ratio for this industry is __ percent and the Herfindahl Index is .