Question 1

Interlocking directorates refers to a situation where

Accepted Answer

Interlocking directorates refer to a situation where a director of one firm also serves as a board member of a competing firm. This creates a potential conflict of interest as the director may prioritize the interests of one firm over the other.

Question 2

The argument that a large firm dominating an industry will not necessarily act like a monopolist, as expressed in the 1920 U.S. Steel case, suggests that the application of antitrust laws should be based on firm

Accepted Answer

The argument that a large firm dominating an industry will not necessarily act like a monopolist suggests that antitrust laws should focus on the behavior of the firm, rather than just its size or structure. This means that the focus should be on whether the firm is engaging in anticompetitive behavior, rather than just its concentration ratio or market share. Therefore, choice A is the best answer.

Question 3

Over the years since the early 1900s, the U.S. government's and courts' aggressiveness in interpreting and enforcing antitrust laws have

Accepted Answer

The U.S. government's and courts' approach to antitrust laws has fluctuated over the years, with periods of both aggressive enforcement and more relaxed attitudes, depending on the political and economic climate.

Question 4

Which of the following does not necessarily violate antitrust laws?

Accepted Answer

The answer of Which of the following does not necessarily...

Question 5

The U.S. Steel case of 1920 and the Alcoa case of 1945 dealt with which antitrust question?

Accepted Answer

The U.S. Steel case of 1920 and the Alcoa case of 1945 were both concerned with whether an industry should be judged by its behavior or its structure, with the courts ultimately ruling in favor of assessing the behavior of the companies involved rather than the structure of the industries themselves.

Question 6

The administrative agency charged with enforcing the provisions of the Clayton Act (1914) was established by additional legislation in the same year. This legislation was the

Accepted Answer

The Federal Trade Commission Act of 1914 established the Federal Trade Commission (FTC), which is responsible for enforcing the provisions of the Clayton Act.

Question 7

The legislation that prohibited acquisition of stock of another company if this would significantly lessen competition is the

Accepted Answer

The Clayton Act of 1914 amended the Sherman Antitrust Act and specifically prohibited certain actions that would lessen competition, including the acquisition of stock of another company if it would substantially reduce competition. The Federal Trade Commission Act (A) created the Federal Trade Commission to regulate business practices, but did not directly address acquisitions. The Celler-Kefauver Act (C) amended the Clayton Act to extend its coverage to asset acquisitions rather than just stock acquisitions, but was not specific to prohibited acquisitions that would lessen competition. The Wheeler-Lea Act (D) was focused on prohibiting unfair and deceptive practices in interstate commerce, and did not address acquisitions or competition.

Question 8

Differences in the interpretation and the enforcement of antitrust laws are in part rooted on the issue of focus. One such issue pertains to the question of whether the policy focus should be on

Accepted Answer

The focus on monopoly behavior versus monopoly structure is a more relevant issue in the interpretation and enforcement of antitrust laws. While monopoly pricing and output are also important considerations, they are typically viewed as outcomes of monopoly behavior and structure. The distinction between behavior and structure is important because it helps to determine whether a firm is engaging in anticompetitive practices, even if it may not have a large market share or control over prices.

Question 9

The agency responsible for investigating instances of fraudulent or misleading advertising is the

Accepted Answer

The Federal Trade Commission (FTC) is the agency responsible for investigating instances of fraudulent or misleading advertising in the United States. It is charged with protecting consumers from deceptive business practices and false advertising. The FTC has the authority to issue fines and penalties against companies found to be engaging in such practices. The other options listed, such as the Interstate Commerce Commission and Federal Communications Commission, have different areas of focus and are not responsible for regulating advertising practices in the same way as the FTC.

Question 10

Differences in the application of antitrust laws are in part rooted on the issue of how broadly antitrust authorities should define the relevant

Accepted Answer

The application of antitrust laws is primarily dependent on how broadly or narrowly antitrust authorities define the relevant market. The relevant market is essentially the area or industry within which firms compete against each other to sell similar products or services. The definition of the relevant market influences the determination of market power, the identification of competitors, and the evaluation of potential anticompetitive behaviors.

Question 11

Anticompetitive price discrimination, interlocking directorates, and tying contracts were banned by the

Accepted Answer

Anticompetitive price discrimination, interlocking directorates, and tying contracts were banned by the Clayton Act. The Clayton Act also strengthened the antitrust laws by prohibiting mergers and acquisitions that could substantially lessen competition.

Question 12

Suppose that you own a toy store and want to buy 100 talking robots. Your supplier will sell you the robots only if you also agree to buy 200 dolls. This is an illegal practice called

Accepted Answer

The situation described is an example of a tying contract, in which a supplier requires a customer to purchase two or more products together, often to the customer's disadvantage.

Question 13

If a buyer who wants product A is required by the seller to buy its products B and C as well, this is called

Accepted Answer

This is a description of a tying contract, where the seller uses its dominant position to require the buyer to also purchase other products in order to obtain the desired product. It can be seen as a form of anti-competitive behavior, as it limits the buyer's choices and can lead to higher prices.

Question 14

The legislation that prohibits the acquisition of assets of another company if the transaction would significantly reduce competition, thereby closing a loophole in the Clayton Act, is the

Accepted Answer

The Celler-Kefauver Act amended the Clayton Act to address a loophole that allowed companies to acquire assets, rather than the entire company, to avoid antitrust scrutiny. This act prohibits such acquisitions if they would substantially lessen competition.

Question 15

A major shortcoming of the Sherman Act was that

Accepted Answer

The Sherman Act did not explicitly state which activities were illegal, leaving it up to interpretation by the courts. This allowed for some companies to engage in anticompetitive behavior without facing repercussions, ultimately limiting the effectiveness of the act.

Question 16

The so-called rule of reason, based on the 1920 U.S. Steel case, stipulates that a merger of two firms in an industry is

Accepted Answer

The rule of reason, based on the 1920 U.S. Steel case, stipulates that a merger of two firms in an industry is legal if there is no resulting unreasonable restraint of trade. This means that the merger can be approved if it does not lead to a significant reduction in competition in the market, and does not result in a monopoly or a dominant market position for the merged firm. Therefore, Option C is the correct choice.

Question 17

Which of the following gave the Federal Trade Commission and the U.S. Justice Department the responsibility to enforce antitrust laws?

Accepted Answer

The Federal Trade Commission Act created the Federal Trade Commission (FTC) in 1914 and gave it the authority to enforce antitrust laws, along with the U.S. Justice Department. The other Acts listed, while also related to antitrust laws, did not specifically give the FTC and Justice Department the responsibility for enforcement.

Question 18

Which act sharpened and clarified the provisions of the Sherman Act and sought to outlaw the techniques that firms might use to gain monopoly power?

Accepted Answer

The Clayton Act was passed in 1914 and aimed to strengthen the Sherman Act by specifically prohibiting certain practices, such as price discrimination and exclusive dealing, which firms could use to achieve monopoly power. The act also established new enforcement tools, such as private antitrust lawsuits and the Federal Trade Commission, to monitor and prevent antitrust violations.

Question 19

The Clayton Act prohibits the acquisition of of competing corporations when the acquisition would lessen competition; the Celler-Kefauver Act prohibits the acquisition of of one firm by another firm when the acquisition would lessen competition.

Accepted Answer

The Clayton Act prohibits the acquisition of stock of competing corporations if it would lessen competition, while the Celler-Kefauver Act extends this prohibition to the acquisition of assets.

Question 20

In the 1911 Standard Oil case, the U.S. Supreme Court found Standard Oil

Accepted Answer

The U.S. Supreme Court found Standard Oil guilty of monopolizing the petroleum industry, and ordered the company to be broken up into smaller, independent companies.

Quiz 21: Antitrust Policy and Regulation