Question 1

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 them 
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

Question 2

Which of the following results will not occur in a monopolistic market?

Accepted Answer

A) The monopolist will maximize profits by setting a price that's higher than marginal cost. 
B) The price will be higher than what would prevail in a competitive market. 
C) In monopoly pricing, income is, in effect, transferred from consumers to the monopolist. 
D) The output level will be higher than in a competitive market. 
A) The monopolist will maximize profits by setting a price that's higher than marginal cost. 
B) The price will be higher than what would prevail in a competitive market. 
C) In monopoly pricing, income is, in effect, transferred from consumers to the monopolist. 
D) The output level will be higher than in a competitive market.

Question 3

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 4

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

Accepted Answer

A) price discrimination 
B) tying contracts 
C) price-fixing 
D) interlocking directorates 
A) price discrimination 
B) tying contracts 
C) price-fixing 
D) interlocking directorates

Question 5

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 1890 
A) Celler-Kefauver Act of 1950 
B) Wheeler-Lea Act of 1938 
C) Clayton Act of 1914 
D) Sherman Act of 1890

Question 6

A 2000 ruling by a Federal court found that Microsoft, with its very popular Windows operating system,

Accepted Answer

A) controlled 95 percent of the PC operating system market and thus was an illegal monopoly. 
B) used anticompetitive practices to maintain and broaden its monopoly power. 
C) illegally lobbied members of Congress to obtain monopoly patents. 
D) conspired to fix prices on its Windows software. 
A) controlled 95 percent of the PC operating system market and thus was an illegal monopoly. 
B) used anticompetitive practices to maintain and broaden its monopoly power. 
C) illegally lobbied members of Congress to obtain monopoly patents. 
D) conspired to fix prices on its Windows software.

Question 7

Most economists conclude that deregulation has reduced prices and led to more competition in deregulated industries.

Accepted Answer

A) True 
 B)False

Question 8

The main purpose of the antitrust laws is

Accepted Answer

A) to encourage firms to produce where P > MC. 
B) to eliminate both negative and positive externalities. 
C) to prevent the monopolization of industries. 
D) to regulate natural monopolies. 
A) to encourage firms to produce where P > MC. 
B) to eliminate both negative and positive externalities. 
C) to prevent the monopolization of industries. 
D) to regulate natural monopolies.

Question 9

Antitrust laws are essentially

Accepted Answer

A) anti-monopoly. 
B) anti-banking. 
C) anti-finance. 
D) anti-competition. 
A) anti-monopoly. 
B) anti-banking. 
C) anti-finance. 
D) anti-competition.

Question 10

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

Question 11

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. 
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.

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. 
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.

Question 13

A merger between an automobile manufacturer and a maker of automobile tires is an example of a

Accepted Answer

A) conglomerate merger. 
B) horizontal merger. 
C) vertical merger. 
D) tying contract. 
A) conglomerate merger. 
B) horizontal merger. 
C) vertical merger. 
D) tying contract.

Question 14

Which of the following does not necessarily violate antitrust laws?

Accepted Answer

A) deceptive advertising 
B) price discrimination 
C) price-fixing 
D) interlocking directorates 
A) deceptive advertising 
B) price discrimination 
C) price-fixing 
D) interlocking directorates

Question 15

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

Question 16

Behavioralists believe that

Accepted Answer

A) if four or fewer firms control more than half of the 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. 
A) if four or fewer firms control more than half of the 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.

Question 17

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. 
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.

Question 18

Tying contracts, which is prohibited under the Clayton Act, refers to the situation where a producer requires that a buyer

Accepted Answer

A) can resell the product but only at a higher price than the original purchase price. 
B) cannot buy a similar product from other producers if that buyer wants to continue buying its product. 
C) buy another of its products as a condition for buying the desired product. 
D) cannot ever resell the product bought. 
A) can resell the product but only at a higher price than the original purchase price. 
B) cannot buy a similar product from other producers if that buyer wants to continue buying its product. 
C) buy another of its products as a condition for buying the desired product. 
D) cannot ever resell the product bought.

Question 19

Unfair advertising practices are investigated by the Federal Trade Commission.

Accepted Answer

A) True 
 B)False

Question 20

A caption that could serve as a warning to proponents of social regulation is

Accepted Answer

A) "There is no free lunch." 
B) "The rule of reason will prevail." 
C) "The public interest will prevail." 
D) "Protect the greatest number." 
A) "There is no free lunch." 
B) "The rule of reason will prevail." 
C) "The public interest will prevail." 
D) "Protect the greatest number."

Exam 21: Antitrust Policy and Regulation

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

Which of the following results will not occur in a monopolistic market?

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

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

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

A 2000 ruling by a Federal court found that Microsoft, with its very popular Windows operating system,

Most economists conclude that deregulation has reduced prices and led to more competition in deregulated industries.

The main purpose of the antitrust laws is

Antitrust laws are essentially

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

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

The public interest theory of regulation

A merger between an automobile manufacturer and a maker of automobile tires is an example of a

Which of the following does not necessarily violate antitrust laws?

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

Behavioralists believe that

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

Tying contracts, which is prohibited under the Clayton Act, refers to the situation where a producer requires that a buyer

Unfair advertising practices are investigated by the Federal Trade Commission.

A caption that could serve as a warning to proponents of social regulation is

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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