Question 1

A law that encourages market competition by prohibiting firms from gaining or exercising excessive market power is

Accepted Answer

Antitrust laws are designed to prevent monopolies and promote competition among firms, ensuring that no single firm can gain or exercise excessive market power to the detriment of consumers and the economy.

Question 2

Antitrust enforcement is primarily limited by the

Accepted Answer

Antitrust enforcement can be significantly limited by the amount of funding allocated by the government. Adequate funding is essential for conducting thorough investigations, pursuing legal actions, and enforcing antitrust laws effectively. Without sufficient financial resources, antitrust enforcement agencies may struggle to fulfill their mandates.

Question 3

When the court requires evidence that a monopoly actually used its size to violate antitrust laws, this criterion is called

Accepted Answer

The "rule of reason" is the legal standard that courts use to determine whether a monopoly's behavior constitutes an unreasonable restraint on competition, focusing on the use of its size and market power to violate antitrust laws.

Question 4

For antitrust concerns, courts have blocked all of the following proposed mergers except

Accepted Answer

Courts have indeed blocked mergers due to antitrust concerns in all the listed cases except for AT&T and MCI, which did not proceed to a merger that was blocked by courts. The other examples are instances where antitrust concerns led to legal intervention to prevent the mergers.

Question 5

The Court will block proposed horizontal and vertical mergers when

Accepted Answer

The Court is likely to block proposed horizontal and vertical mergers when high market concentration already exists because such mergers can reduce competition, leading to a monopoly or oligopoly situation. This can harm consumers through higher prices, reduced choice, and decreased innovation.

Question 6

Under current antitrust laws, conglomerates are

Accepted Answer

The answer of Under current antitrust laws, conglomerates are
...

Question 7

The Department of Justice guidelines call for government intervention inmergers when the Herfindahl-Hirschman Index in that industry is

Accepted Answer

The Department of Justice guidelines suggest government intervention in mergers when the Herfindahl-Hirschman Index (HHI) in that industry is more than 1,800, indicating a high level of market concentration that could reduce competition.

Question 8

The Department of Justice guidelines suggest that the government not interfere with mergers that occur in industries with a Herfindahl-Hirschman Index that is

Accepted Answer

The Department of Justice considers markets with a Herfindahl-Hirschman Index (HHI) of less than 1,000 to be unconcentrated, and typically does not interfere with mergers in such markets.

Question 9

Which one of the following statements about policies to deal with monopoly is true?

Accepted Answer

There is a wide range of opinions among economists on how best to address the issues of monopoly and oligopoly, reflecting the complexity of the issue and the variety of potential impacts of different policies.

Question 10

You are a member of your city's cable television regulatory commission. For the third time this year, the local cable provider has come before the commission, asking for a rate increase. This time it is to cover the cost of new, state-of-the-art cable relay equipment. Last month it was for money for advanced training for cable installers. The time before that, it wanted to cover the cost of new office equipment. How do you explain the cable company's behavior?

Accepted Answer

The answer of You are a member of your city's...

Question 11

You are the mayor of your home town, and one day you arrive at city hall to find angry voters demonstrating against you. They are mad because your office created a garbage-collection monopoly by awarding only one company a permit to collect garbage in your town. The voters claim that the company is overcharging and providing poor service. They want you to do something that will lower rates and improve service. You call your staff economist, who presents evidence that there are substantial increasing economies of scale to garbage collection. What are your options if you are interested in efficiency?

Accepted Answer

The answer of You are the mayor of your home...

Question 12

Alan runs the only taxi service in town. Whenever he raises his fares above $.30 per mile, other taxi firms enter and compete with him to drive his fares back to $.30 per mile. Describe what kind of market Alan is operating in and if it is plausible that Alan might set his fare so as to achieve efficiency? Explain.

Accepted Answer

The answer of Alan runs the only taxi service in...

Question 13

a.What is the theory of creative destruction?
b. According to this theory, do we need to worry about the fact that our local power utility has a monopoly in the provision of electricity?

Accepted Answer

The answer of a.What is the theory of creative destruction?
b....

Question 14

Walmart is known for entering small towns and driving out its competitors. Using the theory of countervailing power, explain why the growth of Walmart may have actually increased, rather than decreased, efficiency in the United States.

Accepted Answer

The answer of Walmart is known for entering small towns...

Question 15

Marriott and Holiday Inn want to merge, but the resulting company would control 44 percent of the market for hotel rooms. They promise the Department of Justice that they will not raise room rates, if they are allowed to merge. Will the Department of Justice allow this merger? Explain using the Herfindahl-Hirschman index.

Accepted Answer

The answer of Marriott and Holiday Inn want to merge,...

Question 16

a. What is a consent decree?
b. Why would the FTC agree to a consent decree?
c. What is the problem with consent decrees?

Accepted Answer

The answer of a. What is a consent decree?
b. Why...

Question 17

Explain why producers rather than consumers may be the beneficiaries of regulation. Does the evidencesupport this view?

Accepted Answer

The answer of Explain why producers rather than consumers may...

Quiz 13: Antitrust and Regulation