Question 1

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 C)
F) All of the above

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

Question 3

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 themE) A) and B)
F) A) and C)

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 directoratesE) B) and D)
F) All of the above

Question 5

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) C) and D)
F) B) and C)

Question 6

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

Question 7

Which of the following does not necessarily violate antitrust laws?

Accepted Answer

A)  deceptive advertising
B)  price discrimination
C)  price-fixing
D)  interlocking directoratesE) All of the above
F) A) and D)

Question 8

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 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 C)
F) All of the above

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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

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

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) A) and B)
F) B) and D)

Question 14

Antitrust laws are essentially

Accepted Answer

A)  anti-monopoly.
B)  anti-banking.
C)  anti-finance.
D)  anti-competition.E) None of the above
F) B) and C)

Question 15

Unfair advertising practices are investigated by the Federal Trade Commission.

Accepted Answer

A) True 
 B)False

Question 16

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

Question 17

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

Question 18

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.E) All of the above
F) C) and D)

Question 19

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.E) A) and D)
F) A) and C)

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."E) None of the above
F) A) and C)

Exam 21: Antitrust Policy and Regulation

Behavioralists believe that

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Which of the following does not necessarily violate antitrust laws?

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The main purpose of the antitrust laws is

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

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

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

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

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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

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

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

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

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

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

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Antitrust laws are essentially

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

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

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Unfair advertising practices are investigated by the Federal Trade Commission.

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The public interest theory of regulation

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

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