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21-21
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Understand
D if f i c u l t y : 02 Medium
Learning Objective: 21-02 Describe some of the key issues relating to the interpretation
and application of antitrust laws.
Test Bank: I
Topic: Antitrust Policy: Issues and Impacts
53.
A firm charged with monopolizing a market is less likely to be convicted if
D.
it sells its product to other firms, rather than directly to consumers.
54.
Price-fixing is considered to be a per se violation of the antitrust laws because
A.
a guilty verdict requires proof of injury to consumers.
55.
Conspiracies to fix prices are
A.
illegal under the Clayton Act.
56.
Which of the following is correct?
D.
Conglomerate mergers occur when two or more firms at various stages in a good's
production are combined.
57.
Which one of the following is not correct?
A.
In antitrust cases defendants attempt to define the relevant market broadly.
21-23
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 21-02 Describe some of the key issues relating to the interpretation
and application of antitrust laws.
Test Bank: I
Topic: Antitrust Policy: Issues and Impacts
58.
Antitrust authorities are least likely to take action against
D.
price-fixing.
59.
Market Share of Firms in Industry
Industry
1
2
3
4
5
6
Alpha
30
30
20
20
-
-
Beta
80
10
5
3
1
1
Cappa
25
25
25
25
-
-
Delta
20
20
20
20
10
10
The table shows market shares of firms in hypothetical industries. Assume these are distinct
industries with no buyer-seller relationships or competition among them. The
Herfindahl
index for Cappa is
C. 100,000.
D. 5,000.
21-24
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 21-02 Describe some of the key issues relating to the interpretation
and application of antitrust laws.
Test Bank: I
Topic: Antitrust Policy: Issues and Impacts
Type: Table
60.
Market Share of Firms in Industry
Industry
1
2
3
4
5
6
Alpha
30
30
20
20
-
-
Beta
80
10
5
3
1
1
Cappa
25
25
25
25
-
-
Delta
20
20
20
20
10
10
The table shows market shares of firms in hypothetical industries. Assume these are distinct
industries with no buyer-seller relationships or competition among them. The industry
with the greatest market power as measured by the Herfindahl index is
A. Alpha.
61.
Market Share of Firms in Industry
Industry
1
2
3
4
5
6
Alpha
30
30
20
20
-
-
Beta
80
10
5
3
1
1
Cappa
25
25
25
25
-
-
Delta
20
20
20
20
10
10
The table shows market shares of firms in hypothetical industries. Assume these are distinct
industries with no buyer-seller relationships or competition among them. A merger
between Firm 2 and Firm 3 in Alpha would be a
A. vertical merger.
62.
Market Share of Firms in Industry
Industry
1
2
3
4
5
6
Alpha
30
30
20
20
-
-
Beta
80
10
5
3
1
1
Cappa
25
25
25
25
-
-
Delta
20
20
20
20
10
10
The table shows market shares of firms in hypothetical industries. Assume these are distinct
industries with no buyer-seller relationships or competition among them. A merger
between Firm 1 in Alpha and Firm 2 in Delta would be a
A.
vertical merger.
21-26
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Type: Table
63.
Market Share of Firms in Industry
Industry
1
2
3
4
5
6
Alpha
30
30
20
20
-
-
Beta
80
10
5
3
1
1
Cappa
25
25
25
25
-
-
Delta
20
20
20
20
10
10
The table shows market shares of firms in hypothetical industries. Assume these are distinct
industries with no buyer-seller relationships or competition among them. The
government
would be most likely to challenge a merger between
A.
Firm 1 in Alpha and Firm 6 in Delta.
64.
Market Share of Firms in Industry
Industry
1
2
3
4
5
6
Alpha
30
30
20
20
-
-
Beta
80
10
5
3
1
1
Cappa
25
25
25
25
-
-
Delta
20
20
20
20
10
10
The table shows market shares of firms in hypothetical industries. Assume these are distinct
industries with no buyer-seller relationships or competition among them. A
structuralist
would most likely assert that there is a violation of antitrust law in which industry?
A. Alpha
65.
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
A. 1,900.
66.
Suppose that two firms in an industry with a Herfindahl index of 5,000 announce a
merger. The U.S. Justice Department concludes the merger will boost the index to 5,500.
The
antitrust authorities will most likely
A.
ignore this merger because of the relatively small increase in the Herfindahl index.
21-28
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 21-02 Describe some of the key issues relating to the interpretation
and application of antitrust laws.
Test Bank: I
Topic: Antitrust Policy: Issues and Impacts
67.
Suppose that two firms in an industry that has a Herfindahl index of 1,000 announce a
merger. The U.S. Justice Department concludes the merger will boost the index to 1,050.
The
antitrust authorities will most likely
C.
allow the merger if foreign entry to the industry is possible.
D.
allow the merger but watch the new firm carefully for future violations of the antitrust
laws.
68.
The view that the antitrust laws should be enforced relatively leniently because of the
tendency for monopoly power to erode over time is known as the
A.
structuralist view of antitrust.
69.
The view that the antitrust laws need to be strongly enforced to prevent illegal business
behaviors, monopolization of markets, and allocative inefficiency is known as the
A.
structuralist view of antitrust.
70.
Economists who adhere to the laissez-faire antitrust perspective
D.
contend that large, dominant firms should be broken into smaller competitive firms and
then government should stand back and let competition prevail.
71.
A firm is likely to be a natural monopoly
A.
when the demand for its product or service is inelastic.
21-30
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Remember
D i f f i c u l t y : 01 Easy
Learning Objective: 21-03 Identify and explain the economic principles and difficulties
relating to the setting of prices rates charged by so-called natural monopolies.
Test Bank: I
Topic: Industrial Regulation
72.
Which of the following is characteristic of a regulated natural monopoly?
A.
extensive economies of scale
73.
Suppose the transportation industry has been regulated for many years. Government
now proposes to deregulate the industry, only to find that firms in the industry oppose this
action. This is consistent with the
A.
public interest theory of regulation.
74.
Using antitrust law to split up an unregulated natural monopoly into several competing
firms
A.
would reduce product price.
75.
A major criticism of industrial regulation is that
A.
it has been applied to virtually all major U.S. corporations in the post-Second World
War period.
76.
Critics of the regulation of natural monopolies contend that
A.
regulation increases the incentive of firms to lower costs.
21-32
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 21-03 Identify and explain the economic principles and difficulties
relating to the setting of prices rates charged by so-called natural monopolies.
Test Bank: I
Topic: Industrial Regulation
77.
A market in which the entire demand for a good or service can be satisfied at the least
cost by a single firm is a
D.
perfect market.
78.
The legal cartel theory of regulation argues that
A. regulation encourages firms to inflate their production costs.
79.
The public interest theory of industrial regulation contends that
A.
while industrial regulation is sound in theory, bureaucrats allow monopolists to obtain
excessive profits.
21-33
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
C.
the objective of regulation is to protect the public from the market power inherent in
natural monopolies.
D. firms in some industries want to be regulated.
80.
Which one of the following is concerned with industrial regulation, as distinct from
social regulation?
A.
Occupational Safety and Health Administration
81.
All of the following are regulatory commissions dealing with industrial regulation (as
distinct from social regulation) except the
D.
50 state public utility commissions.
21-34
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: I
Topic: Industrial Regulation
82.
Where there is natural monopoly, government is most likely to implement
A.
social regulation.
83.
The main purpose of industrial regulation is to
A. lower price to marginal cost.
84.
Critics of industrial regulation say that such regulation
D.
suffers from the free-rider problem.
21-35
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Remember
D i f f i c u l t y : 01 Easy
Learning Objective: 21-03 Identify and explain the economic principles and difficulties
relating to the setting of prices rates charged by so-called natural monopolies.
Test Bank: I
Topic: Industrial Regulation
85.
Critics of industrial regulation say that such regulation
A. benefits small firms at the expense of large firms.
86.
Overall, economists believe that deregulation of industries formerly subjected to
industrial regulation
A.
has been a clear failure.
87.
The largest efficiency gains from deregulation have occurred in the
A.
natural gas and cable television industries.
21-36
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B.
cable television and railroad industries.
C.
communications and stock-brokering industries.
D.
airlines, trucking, and railroad industries.
88.
Social, as distinct from industrial, regulation is the major focus of the
A.
Federal Trade Commission.
89.
Defenders of social regulation point out that
A. social regulation is a better alternative than unregulated natural monopoly.
21-37
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Topic: Social Regulation
90.
Social regulation differs from industrial regulation in that
D.
industrial regulation regulates products, whereas social regulation regulates prices.
91.
Critics of social regulation argue that it
A.
causes deflation.
92.
Which one of the following is concerned with social regulation?
D.
Federal Energy Regulatory Commission
21-38
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Understand
D i f f i c u l t y : 02 Medium
Learning Objective: 21-04 Discuss the nature of social regulation, its benefits and costs,
and its optimal level.
Test Bank: I
Topic: Social Regulation
93.
The optimal amount of social regulation occurs where the marginal benefit of such
regulation
D.
is at its maximum.
94.
Congressional representatives have called for extensive ergonomics regulations to
reduce strains and injuries from repetitive activities by workers. Such regulation, if passed,
would be a good example of
A.
industrial regulation.
95.
(Consider This) The Consider This box "Of Catfish and Art (and Other Things in
21-39
Common)" lists examples of recent antitrust cases involving
A.
monopolization.
96.
(Consider This) According to the Consider This box on catfish and art, which of the
following firms were convicted for horizontal price-fixing?
A.
Dell and Gateway (personal computer makers)
97.
(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?
D.
Virgin Atlantic and Aeroflot
98.
(Last Word) In 1994, the U.S. Department of Justice stopped which of the following
practices?
A. airlines explicitly agreeing to divide the market so that each carrier could have a local
monopoly
99.
(Last Word) In 2000, Microsoft was fined $2.7 billion for
D.
deliberately pricing Windows 95 and 98 below marginal cost to monopolize the market
for operating systems for personal computers.
