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Chapter 27 Regulation and Antitrust Policy in a Globalized Economy 817
19) Which of the following is exempt from antitrust laws?
A) Professional football B) Petroleum companies
C) Airlines D) Hospitals
20) Which of the following is exempt from antitrust laws?
A) Professional basketball B) Suppliers of military equipment
C) Telephone companies D) Automobile companies
21) The first antitrust law in the United States was the
A) Clayton Act. B) Contestable Markets Act.
C) the Federal Trade Commission Act. D) Sherman Antitrust Act.
22) The idea behind antitrust legislation is to
A) promote competition in the market. B)
j
ustify deregulation of industries.
C) implement contestable markets. D) create larger firms.
23) If antitrust legislation is successful, then
A) firms will produce the quantity at which marginal cost equals marginal revenue.
B) most firms will be earning a positive economic profit.
C) the price of each item will equal its marginal social opportunity costs.
D) natural monopoly will be eliminated.
24) If antitrust legislation is successful, then the monopolistic firm will
A) decrease output and charge a lower price than before.
B) increase output and charge a higher price than before.
C) increase output and charge a lower price than before.
D) decrease output and charge a higher price than before.
25) Why is antitrust legislation necessary?
A) Monopolies tend to misallocate resources.
B) All monopolies are unlawful in the United States.
C) Monopolies tend to allocate resources in a socially optimal manner.
D) Monopolies will always make a profit in the long run.
26) Which of the following will NOT be true if the antitrust laws are successful?
A) Producers will earn zero economic profits in the long run.
B) Firms will not restrict output.
C) Firms will produce the competitive output.
D) Firms will produce the quantity at which marginal cost equals marginal revenue and
charge a price that is greater than marginal cost.
27) The Sherman Antitrust Act was passed to
A) protect companies from foreign competition.
B) protect the monopoly profits of firms.
C) control the growth of monopolies in the U.S.
D) prevent market price from equaling marginal cost.
28) Section 1 of the Sherman Antitrust Act makes it illegal to
A) form a monopolistically competitive firm.
B) restrain trade.
C) price discriminate.
D) have an oligopoly.
29) As a result of a conviction under the Sherman Antitrust Act, Standard Oil of New Jersey
A) was fined for its extensive price discriminating activity.
B) was restrained from oil exploration for twenty five years, which enabled other oil firms to
assume leadership in the industry.
C) was broken up into many smaller companies.
D) went bankrupt and no longer is in existence.
30) What is the relationship between the Sherman Antitrust Act and the Clayton Act?
A) The Clayton Act was the first act passed and the Sherman Antitrust Act was the second.
B) The Sherman Antitrust Act encouraged competition among firms in the U.S. while the
Clayton Act encouraged competition among foreign firms.
C) The Clayton Act strengthened the Sherman Antitrust Act by limiting some very specific
business practices.
D) Both Acts deal with issues of setting price and quantity for regulated industries.
31) It is illegal to price discriminate except in cases in which the price differences are due to actual
cost differences. This situation is due to which antitrust act?
A) Clayton Act B) Contestable Market Act
C) Federal Trade Commission Act D) Sherman Antitrust Act
32) The Chain Store Act is a name given to the
A) Clayton Act. B) Federal Trade Commission Act.
C) Robinson Patman Act. D) Sherman Antitrust Act.
33) Unfair or deceptive acts or practices in commerce were prohibited by the
A) Clayton Act.
B) Clayton Act as amended by the Robinson Patman Act.
C) Federal Trade Commission Act.
D) 1938 amendment to the Federal Trade Commission Act.
34) The FTC is
A) the act that prevents producers from driving out smaller competitors by means of selected
discriminatory price cuts.
B) the commission that investigates unfair competitive practices such as misleading
advertising.
C) an agency which has been set up to regulate the federal government.
D) the agency set up to regulate hospitals.
35) Ajax Corporation has just started advertising that there are 16 ounces in every package. In
reality the packages contain only 14 ounces. This misleading advertising
A) is in violation of the Robinson Patman Act.
B) is exempt from the antitrust laws.
C) could be subject to an investigation by the Federal Trade Commission.
D) could be subject to an investigation by the Sherman Commission.
36) Which of the following are exempt from the antitrust laws?
A) Colleges and universities B) All professional athletes
C) Labor unions D) Deregulated industries
37) All of the following are exempt from antitrust enforcement EXCEPT
A) professional baseball. B) labor unions.
C) hospitals. D) television and radio stations.
38) The first antitrust law in the United States was the
A) Glass Steagall Act. B) Robinson Patman Act.
C) Clayton Act. D) Sherman Act.
39) There are many exemptions from antitrust laws. Which of the following is NOT one of them?
A) labor unions B) public utilities C) hospitals D) publishers
40) The statement Every contract, combination in the form of a trust or otherwise, or conspiracy, in
restraint of trade or commerce . . . is found in the
A) Sherman Antitrust Act. B) Clayton Antitrust Act.
C) Robinson Patman Act. D) Interstate Commerce Commission Act.
41) In a court decision in June 2001, the Federal District Count of Appeals in Washington, D.C.
found that Microsoft had violated the
A) Clayton Act. B) Robinson Patman Act.
C) Sherman Act. D) Celler Kefauver Act.
42) The antitrust legislation that forbids a company from selling goods on the condition that the
purchaser must deal exclusively with that company is the
A) Sherman Act. B) Robinson Patman Act.
C) Fair Trade Commission Act. D) Clayton Act.
43) The agency that deals with issues of unfair and deceptive acts or practices in commerce is the
A) Federal Trade Commission. B) Federal Products Commission.
C) Federal Consumer Protection Agency. D) Federal Advertising Commission.
44) One organization in the United States today that is exempt from antitrust laws is
A) the automobile industry. B) professional baseball.
C) the oil industry. D) the steel industry.
45) The Sherman Antitrust Act of 1890 prohibited
A) export tariffs. B) attempts to restrain trade.
C) all existing monopolies. D) interstate commerce.
46) The Sherman Antitrust Act was enforced in 1906 by a ruling of the Supreme Court regarding the
monopolization of the oil industry by
A) Getty Oil of Oklahoma. B) Texaco Oil of Texas.
C) Gulf Oil of Pennsylvania. D) Standard Oil of New Jersey.
47) The law passed by Congress in 1914 that was designed to sharpen or define further the
vagueness of the Sherman Act is called
A) the Robinson Patman Act. B) the Wheeler Lea Act.
C) the Clayton Act. D) the Federal Trade Commission Act.
48) The act of Congress which prohibited unfair or deceptive acts or practices in commerce is
called
A) the Federal Trade Commission Act of 1914.
B) the Clayton Act.
C) the Chain Store Act.
D) the Robinson Patman Act.
49) Another name for the Chain Store Act is
A) the Sherman Antitrust Act of 1890.
B) the Clayton Act of 1914.
C) the Federal Trade Commission Act of 1914.
D) the Robinson Patman Act of 1936.
50) Which of the following organizations is exempt from prosecution under the Sherman Antitrust
Act (1890)?
A) retailers B)
b
ook publishers
C) labor unions D) television stations
51) The Sherman Act
A) prohibited banks from crossing states lines.
B) prohibited railroads from transporting explosives.
C) provided for the regulation of natural monopolies.
D) declared that monopolization and restraint of trade were illegal.
52) Which of the following is illegal according to the antitrust laws?
A) the use of coupons
B) price discrimination based on cost differences
C) vertical mergers
D) price fixing
53) The Supreme Court s decision in the Standard Oil of New Jersey case was
A) to force the company to send refund checks to customers.
B) to force the company to pay $10 billion in fines.
C) to increase the fine imposed by a lower court.
D) to break up the company.
54) Suppose that smart phone producers meet secretly and agree to issue the smart phones of their
most successful models sequentially and at the same price that maximizes their profits. After
hearing about the secret meeting the U.S. Justice Department is most likely to file charges under
the
A) Sherman Act. B) Wheeler Lea Act.
C) Robinson Patman Act. D) FTC Act.
55) Which of the following acts outlawed selling products at unreasonably low prices with the
intent of reducing competition?
A) Sherman Act B) FTC Act
C) Robinson Patman Act D) Wheeler Lea Act
56) All of the following are exempted from antitrust laws EXCEPT
A) labor unions. B) Microsoft Windows.
C) professional baseball. D) hospitals.
57) All of the following are exempt from antitrust lawsuits EXCEPT
A) labor unions. B) professional baseball.
C) public transportation. D) software developers.
58) The first antitrust law that the U.S. Congress enacted was
A) the Clayton Antitrust Act. B) the Sherman Antitrust Act.
C) the Robinson Patman Act. D) the Federal Trade Commission Act.
59) A retail store cuts the prices of the products it sells to force its competitor to leave the market.
This is prohibited by the
A) Sherman Act B) Robinson Patman Act
C) Aldrich Act. D) FTC Act
60) Antitrust laws in the United States
A) are an attempt to foster competition.
B) are not necessary in the twenty first century.
C) have not been used in the past twenty five years.
D) are the same as the laws in the European Union.
61) Discuss the Clayton Act and the Federal Trade Commission Act, and relevant amendments to
them.
62) Discuss the important provisions of the Sherman Antitrust Act of 1890.
27.6 Antitrust Enforcement
1) The Supreme Court has defined the offense of monopolization as involving all of the following
elements EXCEPT
A) the possession of monopoly power in the relevant market.
B) the willful acquisition of monopoly power.
C) the ability to grow a business as a consequence of a superior product.
D) the maintenance of monopoly power.
2) Which of the following defines monopoly?
A) Sherman Act B) Clayton Act
C) Federal Trade Commission Act D) none of the above
3) Which of the following defines monopolization?
A) The Securities and Exchange Commission
B) The Federal Reserve
C) U.S. Supreme Court
D) Federal Trade Commission Act
4) The act of selling an item in slightly altered forms at different prices and to different groups of
consumers is known as
A)
b
undling. B) versioning.
C) tie in sales. D) lemons marketing.
5) The act of offering two or more products for sale as a set is called
A)
b
undling. B) versioning. C) tie in sales. D)
b
randing.
6) When trying to determine if a firm has monopoly power, courts in the United States tend to
examine
A) the firm s percentage share of the relevant market.
B) the composition of the firm s board of directors.
C) the way in which the firm has differentiated its product.
D) the absolute dollar value of business the firm collects each year.
7) As a general rule of thumb, a firm is considered to have monopoly power if
A) it has fewer than 10 competitors nationwide.
B) its share of the relevant market is 70 percent or more.
C) the product it manufactures has less than five close substitutes.
D) its total revenues are greater than $50 million per year.
8) The primary measure of monopoly power is called the
A) market share test. B) litmus test.
C) Robinson Patman Act ratio. D) monopoly measure.
9) Defining the relevant market involves looking at two components. They are
A) the competitive market and the dominant market.
B) the local market and the national market.
C) the geographic market and the product market.
D) the goods market and the services market.
10) The Sudsy Soda Company will not sell its soft drinks to a restaurant unless that business also
buys paper cups from Sudsy. This requirement is an example of
A) product versioning. B) tie in sales.
C) price differentiation. D) complementary pricing.
11) One of the elements of monopolization is
A) having a monopoly.
B) wanting to be a monopoly and wanting to earn monopoly profits.
C) monopoly pricing.
D) the willful acquisition of monopoly power.
12) One of the elements of monopolization is
A) having a superior product or having a superior business acumen..
B) the possession of monopoly power in the relevant market.
C) when only one firm exists in an industry.
D) having a significant pricing power due to an accident in the relevant market.
13) The possession of monopoly power and the willful acquisition of that power is
A) defined in the Sherman Antitrust Act as monopolization.
B) defined by the Supreme Court as monopolization.
C) not defined as monopolization until a statement about profits is included.
D) not the definition of monopolization.
14) The Supreme Court has defined the offense of monopolization to
A)
b
e when only one firm exists in an industry.
B) occur when asymmetric information exists.
C) include the possession of monopoly power and the willful maintenance of that power.
D)
b
e unfair acts in the practice of commerce.
15) The percentage of a market that a particular firm supplies is
A) asymmetric information. B) market share.
C)
b
undling. D) the capture hypothesis.
16) The primary measure of monopoly power is
A) the market share test. B) the Sherman test.
C) creative response. D) the capture hypothesis.
17) The primary measure of monopoly power used by the government is the
A) profitability of the leading firms in an industry.
B) percentage of a market controlled by the leading firms in the industry.
C) gap between price and marginal cost.
D) gap between price and average total cost.
18) The key issue in determining the relevant product market is
A) the degree of interchangeability between products.
B) the specific geographic area in which competing products overlap.
C) the production processes used to produce the goods.
D) the market share test.
19) Offering two or more products for sale as a set is known as
A)
b
undling. B) versioning.
C) monopolizing. D) product sharing.
20) The United States as a whole would be inappropriate as the relevant geographic market when
an antitrust case involved
A) ABC and NBC. B) two auto producers.
C) two steel producers. D) two concrete producers.
21) Courts have generally adopted the notion that a firm has monopoly power if its relevant market
share is ________ or more.
A) 20 percent B) 40 percent C) 70 percent D) 50 percent
22) The main goal of antitrust policy is to
A) encourage firms to produce at the MR demand level.
B) regulate natural monopolies.
C) prevent the monopolization of industries.
D) prevent the nationalization of industries.
23) The first step in enforcing any antitrust policy is to
A) win the support of the public.
B) win congressional approval.
C) win the approval of the state senators from the state where the company is headquartered.
D) define the market.
24) Clarke s gas station in Podunk only sells gasoline if customers also purchase oil.
A) This is called a tie in sale and is in violation of antitrust laws.
B) This is not in violation of antitrust laws, as cars need both oil and gas.
C) This is not in violation of antitrust laws, as consumers get the oil below market prices.
D) This is in violation of the Robinson Patman Act.
25) When companies sell slightly different forms of a product to different groups of customers, this
is known as
A) market testing. B) editions. C) adaptations. D) versioning.
26) A firm is generally scrutinized as a potential monopoly when its share of sales in the relevant
market reaches
A) 60 percent of the market. B) 35 percent of the market.
C) 70 percent of the market. D) 25 percent of the market.
27) A typical measure of monopoly power that uses the percentage of a particular market that a
firm supplies is known as the
A) monopoly test. B) market share test.
C) Sherman test. D) FTC test.
28) One of the agencies responsible for enforcement of antitrust policy is
A) the Trust Division of Congress. B) the Federal Trade Commission.
C) the World Trade Organization. D) the Food and Drug Administration.
29) Enforcement of antitrust policy is the responsibility of
A) the Trust Division of Congress and the World Trade Organization.
B) the Federal Trade Commission and the Antitrust Division of the Department of Justice.
C) the World Trade Organization and the FDA.
D) the Food and Drug Administration and Congress.
30) A measure of monopoly power used by the government is the
A) percentage share of the relevant market or market share test.
B) profit of the firm compared to other firms in the industry.
C) price charged by the firm for goods and services.
D) percentage difference between price and marginal cost.
31) When Microsoft put together a set of products with the Windows operating system, it was
practicing
A)
b
undling. B) tie in sales. C) versioning. D) compacting.
32) What is the difference between product versioning and product bundling? Which of these two
business practices have antitrust authorities been more likely to regard to be the form of price
discrimination called tie in sales? Why?
33) What is the difference between holding a monopoly and monopolization? Which is illegal?
Explain.
