Question 1

Frequently in American economic history, the government has regulated a firm's prices

Accepted Answer

A)   even when it is farfetched to think of the firm as a natural monopoly.
B)   to force a firm to face intense competition at the beginning stages of its existence.
C)   to prevent international competition from capturing a market.
D)   to raise government revenue.
E)   to lower the cost of living.

Question 2

Antitrust policy aims at restoring confidence in government.

Accepted Answer

A) True 
 B)False

Question 3

When a clothing manufacturer merges with a retail clothing store chain, the merger is considered a

Accepted Answer

A)   vertical merger.
B)   conglomerate merger.
C)   horizontal merger.
D)   corporate raid.
E)   competitive merger.

Question 4

The table below shows the market shares of three industries.  Use the FTC merger guidelines to determine whether the following changes in the industries would be permitted:

Accepted Answer

The answer of The table below shows the market shares...

Question 5

In accordance with their merger guidelines, the Justice Department and the Federal Trade Commission would probably challenge a merger if the

Accepted Answer

A)   number of firms in the industry were very large.
B)   industry had a Herfindahl-Hirschman index above 800 and the index rose by 80 points or more.
C)   industry had a Herfindahl-Hirschman index above 1,800 and the index rose by 100 points or more.
D)   industry had a Herfindahl-Hirschman index below 1,000.
E)   firms' markets were very large.

Question 6

If an industry is a natural monopoly, then for a given output level the average total cost of two individual firms in the industry is higher than the average total cost of one firm.

Accepted Answer

A) True 
 B)False

Question 7

If one includes carbonated soft drinks, powdered soft drinks, bottled water, and juice drinks in the definition of the beverage industry, one is using a

Accepted Answer

A)   broad market definition.
B)   medium market definition.
C)   narrow market definition.
D)   Department of Commerce market definition.
E)   Federal Trade Commission market definition.

Question 8

Antitrust policy attempts to prevent collusion among sellers and to prevent restraint of trade resulting from monopoly power.

Accepted Answer

A) True 
 B)False

Question 9

Incentive regulation is sometimes made difficult by asymmetric information problems.

Accepted Answer

A) True 
 B)False

Question 10

Since 1890, the government has ordered the breakup of

Accepted Answer

A)   Standard Oil.
B)   Pacific Bell.
C)   Coca-Cola.
D)   IBM.
E)   General Motors.

Question 11

When there are economies of scale in the production of a product, the long-run average total cost curve

Accepted Answer

A)   increases as output increases.
B)   sometimes increases and sometimes decreases as output increases.
C)   does not change as output increases.
D)   declines as output increases.
E)   is horizontal.

Question 12

The relative infrequency of government-forced breakups in recent years may be due to

Accepted Answer

A)   decreased profitability of U.S. firms.
B)   greater international competition.
C)   government reaction to losing many court cases.
D)   the inability of government to decide which action to take.
E)   the decreased effectiveness of merger policy.

Question 13

In the past, the Interstate Commerce Commission (ICC)  regulated the trucking industry by

Accepted Answer

A)   putting a floor on the price that trucking companies could charge when shipping goods interstate.
B)   putting a ceiling on the price that trucking companies could charge when shipping goods intrastate.
C)   not allowing one trucking company to haul goods for another trucking company.
D)   limiting the regions that each trucking company could serve.
E)   preventing trucking companies from merging.

Question 14

Since the 1980s, U.S. industries have become more regulated.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following gives the government the authority to take action against price fixing?

Accepted Answer

A)   Section 1 of the Sherman Act
B)   Section 2 of the Sherman Act
C)   The Clayton Act
D)   The Glass-Steagall Act
E)   The Federal Trade Commission Act

Question 16

If powdered soft drinks were perfect substitutes for carbonated soft drinks, then the demand curve for carbonated soft drinks would

Accepted Answer

A)   be perfectly inelastic.
B)   have a price elasticity of 0.5.
C)   be perfectly elastic.
D)   have no price elasticity.
E)   have a unit-price elasticity.

Question 17

How do the FTC and the Justice Department use the 5-percent rule to define the market in which firms compete?

Accepted Answer

If a group of firms in a particular cate...

Question 18

Exhibit 12-1 
-Exhibit 12-1 shows the market shares of eight firms in an industry. Which of the following mergers would most likely be challenged by the U.S. Department of Justice?

Accepted Answer

A)   A merger between two of the firms, each with 5 percent market share
B)   A merger between two of the firms, each with 10 percent market share
C)   A merger between a firm with 5 percent market share and a firm with 10 percent market share
D)   A merger between a firm with 50 percent market share and a firm with 10 percent market share
E)   Any merger in this industry would be challenged.

Question 19

There is more controversy among economists about the effects of vertical restraints than the effects of horizontal restraints.

Accepted Answer

A) True 
 B)False

Question 20

A massive wave of mergers and consolidations in the United States 100 years ago was made possible by

Accepted Answer

A)   the opening up of the western states.
B)   rapid innovations in transportation, communication, and management techniques.
C)   a massive influx of immigrants from foreign countries.
D)   the growth of the American economy due to international trade.
E)   the growth of toll roads.

Exam 12: Antitrust Policy and Regulation

If an industry is a natural monopoly, then for a given output level the average total cost of two individual firms in the industry is higher than the average total cost of one firm.

Correct AnswerverifiedShow Answer

Incentive regulation is sometimes made difficult by asymmetric information problems.

Correct AnswerverifiedShow Answer

The table below shows the market shares of three industries. Use the FTC merger guidelines to determine whether the following changes in the industries would be permitted:

Correct AnswerverifiedShow Answer

There is more controversy among economists about the effects of vertical restraints than the effects of horizontal restraints.

Correct AnswerverifiedShow Answer

How do the FTC and the Justice Department use the 5-percent rule to define the market in which firms compete?

Correct AnswerverifiedIf a group of firms in a particular cate...View AnswerShow Answer

When there are economies of scale in the production of a product, the long-run average total cost curve

Correct AnswerverifiedShow Answer

In accordance with their merger guidelines, the Justice Department and the Federal Trade Commission would probably challenge a merger if the

Correct AnswerverifiedShow Answer

If powdered soft drinks were perfect substitutes for carbonated soft drinks, then the demand curve for carbonated soft drinks would

Correct AnswerverifiedShow Answer

A massive wave of mergers and consolidations in the United States 100 years ago was made possible by

Correct AnswerverifiedShow Answer

In the past, the Interstate Commerce Commission (ICC) regulated the trucking industry by

Correct AnswerverifiedShow Answer

Antitrust policy aims at restoring confidence in government.

Correct AnswerverifiedShow Answer

Antitrust policy attempts to prevent collusion among sellers and to prevent restraint of trade resulting from monopoly power.

Correct AnswerverifiedShow Answer

Exhibit 12-1 -Exhibit 12-1 shows the market shares of eight firms in an industry. Which of the following mergers would most likely be challenged by the U.S. Department of Justice?

Correct AnswerverifiedShow Answer

Since 1890, the government has ordered the breakup of

Correct AnswerverifiedShow Answer

Since the 1980s, U.S. industries have become more regulated.

Correct AnswerverifiedShow Answer

Which of the following gives the government the authority to take action against price fixing?

Correct AnswerverifiedShow Answer

If one includes carbonated soft drinks, powdered soft drinks, bottled water, and juice drinks in the definition of the beverage industry, one is using a

Correct AnswerverifiedShow Answer

The relative infrequency of government-forced breakups in recent years may be due to

Correct AnswerverifiedShow Answer

When a clothing manufacturer merges with a retail clothing store chain, the merger is considered a

Correct AnswerverifiedShow Answer

Frequently in American economic history, the government has regulated a firm's prices

Correct AnswerverifiedShow Answer

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If a group of firms in a particular cate...
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