Transcript Chapter 13 Practice Quiz Antitrust and Regulation 1

Chapter 13
Practice Quiz
Antitrust and Regulation
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1. Which of the following is illegal under
the Sherman Act?
a. Attempts to monopolize.
b. Price fixing.
c. Formation of cartels.
d. All of the above are illegal.
D. The Sherman Act of 1890 is the federal
antitrust law to curb trusts, but the
federal government did not win a notable
case until 1911.
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2. Officers of five large building-materials
companies meet and agree that none of
them will submit bids on government
contracts lower than an agreed-upon level.
This is an example of
a. price fixing.
b. vertical restriction.
c. a tying contract.
d. an interlocking directorate.
A. The Sherman Act was enacted with vague
language, but price fixing is clearly a
“conspiracy in restraint of trade”.
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3. A fabric shop cannot sell Singer sewing
machines if it also sells other brands of
sewing machines. This is an example of
a. a resale price maintenance.
b. territorial restrictions.
c. a tying agreement.
d. exclusive dealing.
D. If the effect is to “substantially lessen
competition” such an agreement between a
manufacturer and a retailer is a violation of
the Clayton Act of 1914.
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4. Under the Clayton Act, horizontal mergers
by stock acquisition were
a. not considered.
b. illegal if they could be shown to lessen
competition.
c. illegal under any circumstances.
d. legal if they could be shown not to lessen
competition.
B. Horizontal mergers are combinations
among competitors in the same industry
which, if allowed, eliminate existing
competition.
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5. Under the Clayton Act, which of the
following was illegal even if it was not
shown to lessen competition substantially?
a. Price discrimination.
b. Tying contracts.
c. Horizontal mergers by stock acquisition.
d. Interlocking directorates.
D. Interlocking directorates is the
situation in which a director of one
company serves on the board of
directors of a competing company.
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6. The importance of the Federal Trade
Commission Act of 1914 is that it
a. set up an independent antitrust agency
with the power to investigate complaints.
b. strengthened the law against mergers.
c. strengthened the law against price
discrimination.
d. none of the above.
A. The FTC Act of 1914 established a fivemember commission appointed by the
president to investigate “unfair methods
of competition.”
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7. Which of the following is concerned
primarily with price discrimination?
a. Sherman Act.
b. Clayton Act.
c. Robinson -Patman Act.
d. Celler-Kefauver Act.
C. The Robinson-Patman Act of 1936 is
an amendment to the Clayton Act that
strengthens the Clayton Act against
price discrimination.
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8. Which of the following is concerned
primarily with mergers?
a. Sherman Act.
b. Clayton Act.
c. Robinson-Patman Act.
d. Celler-Kefauver Act.
D. The Celler-Kefauver Act is called the
“antimerger act” because it closed the
loophole in the Clayton Act by prohibiting
mergers by sale of physical assets.
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9. The Utah Pie case was brought under
which of the following laws?
a. Sherman Act.
b. Federal Trade Commission Act.
c. Robinson-Patman Act.
d. Celler-Kefauver Act.
C. Utah Pie was a small frozen dessert pie firm
in Salt Lake City that used three outside
national competitors for price discrimination.
The Supreme Court ruled in Utah Pie’s favor.
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10. Although U.S. Steel controlled nearly 75
percent of the domestic iron and steel
industry, in 1920 the Supreme Court ruled
that the firm was not in violation of the
Sherman Act because there was no
evidence of abusive behavior. What
antitrust doctrine was the Court applying
in this case?
a. The rule of reason.
b. The per se rule.
c. The marginal cost pricing rule.
d. The natural monopoly rule.
A. The rule of reason applied when a firm was
not engaged in anticompetitive behavior. 11
11. In which antitrust case did the courts
first apply the per se rule to determine
whether a firm was in violation of the
Sherman Act?
a. The Standard Oil case.
b. The Alcoa case.
c. The IBM case.
d. The MIT case.
B. The court decision in the Alcoa case of 1945
replaced the rule of reason with the per se
rule, which states that the mere existence of
monopoly is illegal.
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12. The Interstate Commerce Commission
(ICC) was established in
a. 1887.
b. 1890.
c. 1929.
d. 1933.
A. The ICC was established for the original
purpose of regulating rail prices by reducing
duplicate trains, depots, and tracks.
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13. Today, the Civil Aeronautics Board
(CAB) regulates airline
a. ticket prices.
b. routes.
c. safety.
d. all of the above.
e. none of the above; the CAB was
abolished in 1984.
E. The CAB was established in 1938 to
regulate airline fares and air routes.
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14. Which of the following provides the
basis for regulation?
a. Natural monopoly.
b. Externalities.
c. Imperfect information.
d. All of the above.
D. In each of these cases, the argument in
favor of regulation is market failure.
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15. Consider a regulated natural monopoly. If
the regulatory commission wants to establish
a fair-return price, then it should set a price
ceiling where the demand curve crosses the
monopoly’s long-run
a. marginal revenue curve.
b. average revenue curve.
c. marginal cost curve.
d. average cost curve.
D. One method for regulators to establish a
fair-return price is to set price equal to longrun average cost and the monopolist earns
zero economic profit.
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