Deck 21: Market Power and Global Corporations

Question 1

Whats defention of terms:
-Celler-Kefauver Act of 1950

Answer 1

forbade the purchase of either the stock of a competing corporation (which had already been illegal) or the assets of competing corporations

Question 2

Whats defention of terms:
-Clayton Act of 1914

Answer 2

forbade corporations to engage in price discrimination and prohibited interlocking directorates where this would lead to a substantial reduction of competition

Question 3

Whats defention of terms:
-conglomerate mergers

Answer 3

situation in which a giant corporation absorbs other corporations that have no relation to its primary product line

Question 4

Whats defention of terms:
-economies of scale

Question 5

Whats defention of terms:
-Federal Trade Commission Act of 1914

Question 6

Whats defention of terms:
-global mergers

Question 7

Whats defention of terms:
-horizontal mergers

Question 8

Whats defention of terms:
-market power

Question 9

Whats defention of terms:
-perfect monopolies

Question 10

Whats defention of terms:
-regulatory capture

Question 11

Whats defention of terms:
-Sherman Antitrust Act of 1890

Question 12

Whats defention of terms:
-vertical mergers

Question 13

Describe how corporations grow in size and cite data documenting their growth.
-The "third wave" of mergers consisted primarily of conglomerate mergers. Explain how conglomerate mergers are different from horizontal or vertical mergers.

Question 14

Describe how corporations grow in size and cite data documenting their growth.
-Policymakers often worry less about conglomerates and market power and more about firms whose business is concentrated in a single industry. Why? What concerns are there about large conglomerates?

Question 15

Describe how corporations grow in size and cite data documenting their growth.
-What are the concerns about the concentration and size of businesses in the global market?

Question 16

Describe how corporations grow in size and cite data documenting their growth.
-Does a global corporation have a perfect monopoly with no competition? Explain.

Question 17

Explain reasons behind the capitalistic tendency toward large firms with market power
-What are economies of scale? Give an example of how the cost per unit of production could be cheaper when many units rather than just a few are produced.

Question 18

Explain reasons behind the capitalistic tendency toward large firms with market power
-How can a firm attempting to capture all possible economies of scale end up having market power in that industry?

Question 19

Describe the impact of firms with market power on economic outcomes.
-What does it mean when economists say that a firm has market power? How does the position of a firm with market power differ from that of a firm in a perfectly competitive market?

Question 20

Describe the impact of firms with market power on economic outcomes.
-Why might large firms with little competition in their market become less efficient?

Question 21

Describe the impact of firms with market power on economic outcomes.
-What are the debates about the impact of advertising on businesses? on consumers? on the larger economy?

Question 22

Compare and Contrast policies and policy debates about regulating the monopoly power of businesses.
-What are some of the debates about regulating monopolies? What is the logic behind the arguments of the different points of view?

Question 23

Compare and Contrast policies and policy debates about regulating the monopoly power of businesses.
-What are some key pieces of legislation aimed at controlling the impact of monopolies?

Question 24

A merger in which one corporation absorbs other corporations that were it direct competitors is called

A) a conglomerate merger.
B) a horizontal merger
C) a vertical merger
D) a global merger

Question 25

ABC corporation makes automobiles. XYZ corporation makes fabric used in the seat covers used in ABC corporation's automobiles. If ABC corporation buys XYZ corporation, this would be

A) a conglomerate merger.
B) a horizontal merger
C) a vertical merger
D) a global merger

Question 26

The first wage of mergers in the US in the beginning of the twentieth century consisted mostly of

A) conglomerate mergers
B) horizontal mergers
C) vertical mergers
D) global mergers

Question 27

The second wave of mergers in the US occurred during the 1920s and was characterized by

A) conglomerate mergers
B) horizontal mergers
C) vertical mergers
D) global mergers

Question 28

The third wave of mergers in the US during the 1960s consisted mostly of

A) conglomerate mergers
B) horizontal mergers
C) vertical mergers
D) global mergers

Question 29

One cause of the emergence of the giant corporation is economies of scale which means

A) total costs decline as output increases.
B) average or per unit costs decline as output increases.
C) profits decline as output increases.
D) inefficiency increases as firm size increases.

Question 30

The debate over the impact of large firms with monopoly market power continues today. What is the conservative position?

A) monopoly may be the best outcome, so there is no need for government regulation.
B) monopolies should not be broken up but should be regulated by the government.
C) monopolies should be taken over by the government and run to serve the public interest.
D) monopoly power will be reduced by the normal operation of market forces.

Question 31

The term, "regulatory capture," refers to a situation in which

A) a government regulatory agency becomes dominated by the industry it is assigned to regulate and works in the interest of the industry rather than in the public interest.
B) a government official assigned to regulate an industry quits to go to work for a corporation in that industry.
C) industry lobbyists write the laws that are used by the regulatory agency that is overseeing that industry.
D) an industry hires government regulators on a part-time basis in an effort to influence outcomes of public hearings.

Question 32

In 2007, employees at the Federal Aviation Administration charged that the agency had information that an airline was flying planes that had not been properly inspected but had failed to act on this information and ground the planes. This circumstance is an example of

A) a revolving door.
B) insider trading
C) regulatory capture
D) retaliation

Question 33

A business firm has "market power" when

A) its products are successful.
B) it can influence or manipulate prices or output in the market.
C) it can sell all it can product at existing market prices.
D) it has brand name recognition