Deck 25: Corporate Mergers and Antitrust

Question 1

There has been an unmistakable steady trend toward bigness in business since

A)the Civil War.
B)1911.
C)the mid-1930s.
D)the late-1990s.

Answer 1

the late-1990s.

Question 2

Each of the following is an advantage of forming a conglomerate except

A)tax advantages.
B)forming a big company.
C)diversification.
D)accumulation of power within two or three closely related industries.

Answer 2

accumulation of power within two or three closely related industries.

Question 3

The "rule of reason" originated in the

A)Standard Oil case of 1911.
B)U.S.Steel case of 1920.
C)ALCOA case of 1945.
D)XEROX case of 1973.

Answer 3

Standard Oil case of 1911.

Question 4

The Supreme Court's "rule of reason"

A)has been applied since the time of the Civil War.
B)was applied from 1911 to 1945.
C)has been applied since 1945.
D)has been applied since 1970.

Question 5

Each of the following companies lost major cases heard by the Supreme Court except

A)ALCOA.
B)DuPont.
C)the Standard Oil Trust.
D)the American Tobacco Trust.

Question 6

The conventional merger is the ____ merger.

A)horizontal
B)vertical
C)conglomerate
D)diversifying

Question 7

Which statement is true?

A)Virtually all economists agree that U.S.industry is becoming increasingly concentrated.
B)The 200 largest firms produce over 90% of our manufactured goods.
C)Since 1980, there has been a marked increase in the number of large mergers.
D)None of these statements are true.

Question 8

The first major setback to the consolidation and concentration of business occurred in

A)1865.
B)1900.
C)1911.
D)1920.

Question 9

Which statement is true?

A)The largest merger in history involved Chase Manhattan Bank.
B)There have been only two mergers in our entire history valued at over $15 billion.
C)It is illegal under our antitrust laws for two firms in the same industry to merge.
D)None of these statements are true.

Question 10

The era of the trust was

A)the late 19th century.
B)1910-1920.
C)1920-1930.
D)1930-1940.
E)1940-1950.

Question 11

Which statement is false?

A)Under the Clayton Act it is illegal for a person to sit on the boards of two competing firms.
B)Deregulation has taken place in the airline and long-distance trucking industries.
C)Indirect corporate interlocking directorates are legal in the United States.
D)None of these statements are false.

Question 12

The Standard Oil trust

A)was broken up in 1946.
B)was controlled by several foreign nations.
C)forced its rivals out of business.
D)was put together by the U.S.government.

Question 13

In the 1960s, about 80% of the mergers were of the __________ variety.

A)horizontal
B)vertical
C)conglomerate
D)conventional

Question 14

In the American Tobacco and Standard Oil cases, the Supreme Court

A)prohibited monopoly per se.
B)prohibited certain illegal tactics.
C)applied the rule of reason.
D)had the government take over the oil and tobacco industries.

Question 15

A merger between Hertz Rent-a-Car and Budget Rent-a Car would be a ______ merger.

A)horizontal
B)vertical
C)conglomerate
D)diversifying

Question 16

The decision to bring suit in an antitrust case is usually made by

A)the injured party.
B)the Supreme Court or a lower federal court.
C)the Department of Commerce.
D)the Department of Justice.

Question 17

A merger between Bank of America and Citibank would be a ____ merger.

A)horizontal
B)vertical
C)conglomerate
D)diversifying

Question 18

Which statement is true?

A)The federal government never intervened in our economy until the 1930s.
B)The federal government intervention in our economy has grown steadily since the time of the Civil War.
C)The federal government has intervened in our economy from time to time throughout our history.
D)None of these statements are true.

Question 19

The antitrust case that ended the use of the "rule of reason" by the Supreme Court was the ________ case.

A)American Tobacco
B)ALCOA
C)U.S.Steel
D)IBM

Question 20

Labor unions became exempt from antitrust enforcement under the ____ Act.

A)Sherman
B)Clayton
C)FTC

Question 21

In the 1920s General Motors gobbled up more than 100 independent carmakers. This would be an example of a ________ merger.

A)vertical
B)horizontal
C)conglomerate

Question 22

In the 1980s

A)the airlines and trucking were subjected to more regulation.
B)the airlines and trucking were subjected to less regulation.
C)the airlines were subjected to more regulation and trucking to less.
D)trucking was subjected to more regulation and the airlines to less.

Question 23

A conglomerate merger takes place when

A)a firm acquires a competitor.
B)similar firms agree to compete.
C)a firm integrates its production backward toward its source of supply or forward in its marketing chain.
D)a firm buys another firm unrelated to the original firm's business.

Question 24

A vertical merger takes place when

A)a firm acquires a conglomerate.
B)a firm acquires a competitor.
C)a firm integrates its production backward toward its source of supply or forward in its marketing chain.
D)firms merge in order to diversify.

Question 25

The earliest antitrust act was the ____ Act.

A)Clayton
B)Federal Trade Commission
C)Sherman

Question 26

Each of the following companies was split up as a result of antitrust prosecution EXCEPT

A)AT&T.
B)the Standard Oil Trust.
C)the American Tobacco Trust.
D)U.S.Steel.

Question 27

A conglomerate merger involves combining firms

A)involved in the same industry.
B)that are based in different countries.
C)from unrelated industries.
D)that control various stages of the production of a particular good from raw materials to finished manufacture.

Question 28

A horizontal merger takes place when

A)a firm acquires a competitor.
B)similar firms agree to compete.
C)firms in different industries merge.
D)a firm diversifies by merging with a foreign firm.

Question 29

The Sherman Act of 1890

A)exempted labor unions from antitrust prosecution.
B)included stringent enforcement provisions.
C)outlawed unfair business practices to exclude rivals from selling in markets.
D)outlawed all monopolies.
E)declared that no firm could have more than 50% of the share of any market.

Question 30

In general we could say that the decade of the 1980s was a time of

A)more regulation.
B)less regulation.
C)little change in degree of regulation.

Question 31

Which of the following is NOT an example of a vertical merger?

A)The merger of a shoe producer and a leather producer
B)The merger of two computer companies
C)The merger of a computer company and a microelectronics chip company
D)The merger of an automobile company and a tire company
E)The merger of a brewery and a producer of hops

Question 32

If the number two and number three firms in an industry with 10 firms merge, what happens to that industry's concentration ratio?

A)It rises
B)It falls
C)It remains the same
D)There is not enough information to determine whether it rises, falls, or remains the same.

Question 33

Each of the following industries was deregulated during the last 30 years except

A)the airlines.
B)trucking.
C)banking.
D)radio and TV.

Question 34

Which statement is true?

A)The Federal Trade Commission Act is the most important antitrust law on the books.
B)The most important antitrust legislation was passed in the last three decades.
C)The Clayton Act outlawed interlocking directorates.
D)None of these statements are true.

Question 35

In the ALCOA Case of 1945, the courts held that:

A)firms that sell more than half of their output overseas are exempt from antitrust legislation.
B)retail and wholesale firms are exempt from antitrust legislation.
C)only contracts and combinations that unreasonably restrain trade are in violation of the Sherman Act.
D)the mere possession of monopoly power is a violation of the antitrust laws.

Question 36

A merger of a firm and its supplier is called

A)a vertical merger.
B)a horizontal merger.
C)a conglomerate merger.
D)a direct merger.
E)an indirect merger.

Question 37

The Clayton Act of 1914

A)outlawed all mergers.
B)abolished the Sherman Act of 1890.
C)outlawed specific business practices that discouraged competition.
D)reduced the federal government's antitrust authority.

Question 38

Specific business practices such as price discrimination are prohibited by the:

A)Clayton Act of 1914.
B)Sherman Act of 1890.
C)Federal Trade Commission Act of 1914.

Question 39

Most of the federal economic policies of the 19th century favored

A)labor.
B)big business.
C)both labor and big business.
D)neither labor nor big business.

Question 40

Which statement is true?

A)The Sherman Act modified the Clayton Act.
B)The Sherman Act prohibits price discrimination.
C)The Sherman Act prohibits interlocking directorates.
D)The Sherman Act prohibits conglomerate mergers.
E)None of these statements are true.

Question 41

Interlocking directorates were expressly forbidden under the

A)Sherman Act.
B)Clayton Act.
C)both the Sherman and Clayton Acts.
D)neither the Sherman Act nor the Clayton Act.

Question 42

The Standard Oil trust

A)forced the railroads to grant it discounts but not to its competitors.
B)forced the railroads to give it payments on every shipment of oil refined by rival firms.
C)violated the Sherman Antitrust Act.
D)was split into 34 separate companies.
E)All of the choices.

Question 43

The relevant market argument was used successfully by

A)Alcoa.
B)DuPont.
C)both Alcoa and DuPont.
D)neither Alcoa nor DuPont.

Question 44

One company has 90% of the market for cola soft drinks. An antitrust action against this company is likely to be defended (by the company) by the argument that

A)there is no substitute for cola soft drinks.
B)the market share is not important.
C)the relevant market is for cola soft drinks.
D)the relevant market is not that for cola soft drinks but for all soft drinks.

Question 45

Which of the following laws stated that attempts to monopolize, conspiracies in restraint of trade, and conspiracies to monopolize were illegal?

A)The Federal Trade Commission Act
B)The Clayton Act
C)The Sherman Antitrust Act
D)All of the choices are correct.

Question 46

Which of the following practices is NOT outlawed by the Clayton Act?

A)A cola company agrees to sell its soft drink to a retail outlet only if the store agrees not to stock its competitors' products.
B)Interlocking directorates exist among large firms that compete with each other.
C)A party supply company that rents desks, chairs, and tables charges a higher price to customers who live a greater distance from the central warehouse.
D)Price discrimination is practiced that lessens competition.

Question 47

Which statement is true?

A)The first trustbusters were Presidents Franklin D.Roosevelt and Harry Truman.
B)The merger of Exxon and Mobil oil companies was a vertical merger.
C)The Supreme Court did not use the rule of reason in the ALCOA case of 1945.
D)The trend toward concentration of business has declined ever since the passage of the Sherman Antitrust in 1890.

Question 48

The era of "trust-busting" took place in the years

A)before World War I.
B)after World War I.
C)before World War II.
D)after World War II.
E)during the Vietnam War.

Question 49

The merger of Chrysler and American Motors was a ____ merger.

A)horizontal
B)vertical
C)conglomerate
D)diversifying

Question 50

The most significant result of the Sherman Antitrust Act was the

A)outlawing of all trusts and monopolies.
B)outlawing of price discrimination.
C)break-up of the sugar trust.
D)break-up of the Standard Oil trust.

Question 51

Cartels that set prices and allocate sales among their member firms were commonly referred to in the late 19th century as

A)conglomerates.
B)trusts.
C)monopolies.
D)multinationals.

Question 52

Which is the most accurate statement?

A)The Justices of the Supreme Court used the "rule of reason" in the 1920s and 1930s to ensure that the Sherman Act was vigorously enforced.
B)Until the Alcoa Case in 1945, the Supreme Court held that you had to be both big and bad before you were found guilty under the Sherman Act.
C)The Alcoa Case established the precedent that having a near monopoly was not, in itself, illegal.
D)Alcoa lost its case largely because of its anticompetitive behavior rather than that it was very big.

Question 53

Corporate takeovers and the financial defenses erected against them have resulted in each of the following except

A)diverting tens of billions of dollars a year from investment in plant and equipment.
B)putting billions of additional dollars into research and development.
C)forcing corporate officers to focus on short-term profitability rather than on long-term growth.
D)placing corporations in very precarious financial straits by taking on mountains of debt.

Question 54

The largest merger in banking and finance history was between

A)Crossland Savings and Metropolitan Savings.
B)Chase Bank and Chemical Bank.
C)Chase Manhattan and J.P.Morgan.
D)Manufacturers Hanover and Chemical Bank.
E)Travelers and Citicorp.

Question 55

Combinations in restraint of trade are prohibited by

A)the Sherman Act.
B)the Clayton Act.
C)the Federal Trade Commission Act.

Question 56

According to Judge Learned Hand, a ______% share of the market is enough to constitute a monopoly.

A)33
B)50
C)64
D)90

Question 57

In 1997, the Justice Department brought a lawsuit against ________ because its growing market power had enabled the company to crush competitors, eliminate competition and innovation.

A)Microsoft
B)Walt Disney
C)Exxon
D)Standard Oil

Question 58

The concept of the "relevant" market was important in which of the following cases?

A)Standard Oil case of 1911
B)DuPont case of 1956
C)IBM case, which was terminated in 1982
D)U.S.Steel case of 1920

Question 59

The merger of RCA and General Electric was a ____ merger.

A)horizontal
B)vertical
C)conglomerate

Question 60

At least in the short run, each of these factors has increased competition except

A)the entry of foreign firms.
B)the growth in size of many American firms.
C)the rise of the service industries.
D)the rise of new industries.

Question 61

Statement I. In 1997 the European Commission indirectly blocked a merger between Boeing and McDonnell Douglas by threatening to impose fines when doing business in Europe. Statement II. Some companies, such as Barnes & Noble, have backed out of proposed acquisitions to avoid antitrust legal battles.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 62

Statement I. The distinction between American and foreign companies is becoming blurred. Statement II. Monopoly and antitrust enforcement will become even more important in the 21st century than it was in the 20th century.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 63

Which statement is true?

A)The federal government never intervened in our economy until the 1930s.
B)Federal government intervention in our economy has grown steadily since the time of the Civil War.
C)The federal government has intervened in our economy from time to time throughout our history.
D)None of these statements are true.

Question 64

General Electric

A)is the present king of conglomerates.
B)has gone bankrupt.
C)lost a major antitrust suit.
D)was built through horizontal mergers.

Question 65

Until the passage of the Airline Deregulation Act of 1978, the Civil Aeronautics Board controlled all of the following except

A)fares.
B)assigned routes.
C)profits.
D)entry into the industry.

Question 66

In the U.S. Steel case, the Supreme Court

A)broke up the company because it was big.
B)applied the rule of reason.
C)applied the 60% rule.
D)determined that the company had violated the Sherman Antitrust Act.

Question 67

Which of the following were descendants of the Standard Oil Trust?

A)Exxon
B)Mobil
C)Marathon Oil
D)Chevron
E)All of the choices were descendants of the Standard Oil Trust.

Question 68

Which of the following statements is false?

A)The Standard Oil trust forced its rivals out of business.
B)The Clayton Act expressly exempted labor unions from prosecution under the Sherman Act.
C)The judge in the Microsoft case concluded that the company used anticompetitive means to maintain a monopoly for its PC operating system software.
D)The rule of reason originated in the ALCOA case of 1945.

Question 69

John D.Rockefeller was the leader of the _____ trust.

A)oil
B)whiskey
C)railroad
D)tobacco

Question 70

The first antitrust act passed was the _____ Antitrust Act.

A)Clayton
B)FTC
C)Celler-Kefauver
D)Sherman

Question 71

Each of the following has tended to foster competition except

A)more foreign competition.
B)the declining importance of manufacturing.
C)the rise of new industries.
D)the declining number of corporate takeovers and mergers.

Question 72

Statement I. One of the jobs of the Federal Trade Commission is to prevent false and deceptive advertising. Statement II. The Federal Trade Commission prevented the mergers of Rite Aid with Revco and Staples with Office Depot.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 73

The deregulation of a few major industries began in the

A)late 1950s.
B)late 1960s.
C)late 1970s.
D)late 1980s.

Question 74

When separate firms engaged in various stages of a production process are united under one ownership, the resulting combination is known as

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

Question 75

The Justice Department brought suit against Microsoft contending ___________.

A)the company forced PC makers to take Internet Explorer as a condition of licensing Windows
B)the company's growing market power enabled them to crush competitors
C)the merger with Netscape's browser, Navigator, was in violation of Microsoft's consent decree
D)None of the choices are correct.

Question 76

Which of the following pharmaceutical companies have settled allegations of illegally marketing pharmaceutical drugs?

A)Pfizer
B)Eli Lilly
C)AstraZeneca
D)All of these companies have settled investigations of illegal marketing.

Question 77

Which statement is true?

A)The Microsoft operating system, Windows, runs on more than 90 percent of the 100 million PCs sold in the world each year.
B)Microsoft's growing market power has enabled the company to crush competitors, thus eliminating competition and innovation.
C)In 1995 Microsoft signed a consent decree with the government that prohibits the company from tying the purchase of one product to another but that allow it to develop "integrated" products.
D)All of the statements are true.

Question 78

____________ the airlines, trucking, and long-distance phone calling has led to lower prices for consumers.

A)Regulation of
B)Trusts in
C)Deregulation of
D)Conglomerates in

Question 79

The effects of deregulation on the economy under the Carter and Reagan administrations have been beneficial in all of the following industries except

A)long-distance trucking.
B)banking.
C)airlines.
D)long-distance phone calling.

Question 80

The Standard Oil trust

A)behaved "badly" according to the Supreme Court.
B)was broken up in 1890.
C)was forced by the Supreme Court to give payments on every shipment of oil it refined to its rivals.
D)was a multinational corporation.