Question 1

A firm is likely to be a natural monopoly

Accepted Answer

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

Question 2

Industrial regulation generally applies in cases where

Accepted Answer

A)  society would benefit if a monopoly is prevented from evolving in a certain market.
B)  a monopoly already exists, and the government believes that society would benefit if it is dissolved.
C)  there is an economic reason for an industry to be organized as a monopoly.
D)  foreign competition in the form of imports is prevalent in the market.E) C) and D)
F) A) and C)

Question 3

A merger that is neither horizontal nor vertical is called a

Accepted Answer

A)  tying merger.
B)  conglomerate merger.
C)  Herfindahl merger.
D)  natural merger.E) C) and D)
F) A) and B)

Question 4

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

Question 5

If a buyer who wants product A is required by the seller to buy its products B and C as well, this is called

Accepted Answer

A)  an exclusive contract.
B)  profit maximization.
C)  competitive pricing.
D)  a tying contract.E) B) and C)
F) C) and D)

Question 6

In 2013, Apple was convicted, along with five publishers, including Harper Collins, Penguin, and Macmillan, of which antitrust violation?

Accepted Answer

A)  monopoly structure
B)  price-fixing
C)  tying contracts
D)  dividing up the marketE) B) and D)
F) A) and B)

Question 7

The regulation of natural monopolies has been criticized because it creates a tendency for regulated firms to use too much labor and too little capital in the production process.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)  price-fixing.
B)  an interlocking directive.
C)  a tying contract.
D)  price discrimination.E) B) and C)
F) A) and D)

Question 9

Which of the following is a per se violation?

Accepted Answer

A)  price discrimination
B)  price-fixing
C)  extremely high Herfindahl index
D)  horizontal mergerE) None of the above
F) B) and C)

Question 10

The basic issue in the DuPont cellophane case was

Accepted Answer

A)  whether trade crossed state lines.
B)  defining the relevant market.
C)  structure versus behavior.
D)  the rule of reason.E) A) and D)
F) None of the above

Question 11

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 12

In the U.S.Steel case of 1920, the courts held that

Accepted Answer

A)  the structure of an industry is more important than its behavior in determining violations of the antitrust laws.
B)  any firm that faces substantial import competition is exempt from the antitrust laws.
C)  although U.S.Steel possessed monopoly power, it had not violated the Sherman Act because it had not unreasonably used that power.
D)  the fact that U.S.Steel possessed monopoly power was a violation of the Sherman Act.E) None of the above
F) A) and B)

Question 13

Social regulation consists of regulating the behavior of people in society in order to promote the safety and harmony in neighborhoods.

Accepted Answer

A) True 
 B)False

Question 14

What is a major characteristic of a natural monopoly?

Accepted Answer

A)  The firm is a single seller of a resource.
B)  It sets price equal to marginal revenue.
C)  There is extensive product advertising.
D)  There is a large range for economies of scale.E) All of the above
F) A) and D)

Question 15

(Consider This)  According to the Consider This box on catfish and art, which of the following airlines in 2007 agreed to pay $300 million in fines for fixing fuel surcharges on passenger tickets and cargo?

Accepted Answer

A)  Korean Air and British Airlines
B)  Qantas and Lufthansa
C)  United Airlines and American Airlines
D)  Virgin Atlantic and AeroflotE) B) and D)
F) All of the above

Question 16

The so-called rule of reason, based on the 1920 U.S.Steel case, stipulates that a merger of two firms in an industry is

Accepted Answer

A)  illegal if the firms are large.
B)  illegal because it increases the monopoly power of the resulting firm.
C)  legal if there is no resulting unreasonable restraint of trade.
D)  legal because the firm will be subject to regulatory control.E) B) and C)
F) A) and D)

Question 17

The Clayton Act prohibits the acquisition of of competing corporations when the acquisition would lessen competition; the Celler-Kefauver Act prohibits the acquisition of of one firm by another firm when the acquisition would lessen competition.

Accepted Answer

A)  stock; assets
B)  assets; stock
C)  stock; customers
D)  stock; bondsE) B) and C)
F) C) and D)

Question 18

All price discrimination is deemed illegal in antitrust legislation.

Accepted Answer

A) True 
 B)False

Question 19

In the Microsoft antitrust case, the federal government said in essence that

Accepted Answer

A)  the mere presence of monopoly violated the Sherman Act, irrespective of Microsoft's behavior.
B)  Microsoft was a "bad monopoly."
C)  Microsoft was generally a "good monopoly" but that its tying contracts involving Internet Explorer violated the Clayton Act.
D)  the case was similar to the U.S.Steel case of 1920.E) A) and B)
F) B) and C)

Question 20

Interlocking directorates are

Accepted Answer

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 Celler-Kefauver Act of 1950.
D)  illegal under provisions of the Clayton Act of 1914.E) B) and D)
F) B) and C)

Exam 21: Antitrust Policy and Regulation

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

Correct AnswerverifiedShow Answer

The basic issue in the DuPont cellophane case was

Correct AnswerverifiedShow Answer

The regulation of natural monopolies has been criticized because it creates a tendency for regulated firms to use too much labor and too little capital in the production process.

Correct AnswerverifiedShow Answer

Social regulation differs from industrial regulation in that

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A merger that is neither horizontal nor vertical is called a

Correct AnswerverifiedShow Answer

A firm is likely to be a natural monopoly

Correct AnswerverifiedShow Answer

If a buyer who wants product A is required by the seller to buy its products B and C as well, this is called

Correct AnswerverifiedShow Answer

(Consider This) According to the Consider This box on catfish and art, which of the following airlines in 2007 agreed to pay $300 million in fines for fixing fuel surcharges on passenger tickets and cargo?

Correct AnswerverifiedShow Answer

What is a major characteristic of a natural monopoly?

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

Which of the following is a per se violation?

Correct AnswerverifiedShow Answer

The so-called rule of reason, based on the 1920 U.S.Steel case, stipulates that a merger of two firms in an industry is

Correct AnswerverifiedShow Answer

Interlocking directorates are

Correct AnswerverifiedShow Answer

All price discrimination is deemed illegal in antitrust legislation.

Correct AnswerverifiedShow Answer

Social regulation consists of regulating the behavior of people in society in order to promote the safety and harmony in neighborhoods.

Correct AnswerverifiedShow Answer

In 2013, Apple was convicted, along with five publishers, including Harper Collins, Penguin, and Macmillan, of which antitrust violation?

Correct AnswerverifiedShow Answer

In the U.S.Steel case of 1920, the courts held that

Correct AnswerverifiedShow Answer

Industrial regulation generally applies in cases where

Correct AnswerverifiedShow Answer

The Clayton Act prohibits the acquisition of of competing corporations when the acquisition would lessen competition; the Celler-Kefauver Act prohibits the acquisition of of one firm by another firm when the acquisition would lessen competition.

Correct AnswerverifiedShow Answer

In the Microsoft antitrust case, the federal government said in essence that

Correct AnswerverifiedShow Answer

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