Question 1

A vertical merger is one that takes place between two companies producing different goods or services for one specific finished product.

Accepted Answer

The answer of A vertical merger is one that takes...

Question 2

A horizontal merger

Accepted Answer

A horizontal merger is a merger between firms in the same industry, for example, a merger between two companies in the automobile industry. This type of merger can result in consolidation and increased market power for the firms involved.

Question 3

Congress has divided the authority to police mergers between the Antitrust Division of the U.S. Department of Justice (AD) and the Federal Trade Commission (FTC). How is this authority divided?

Accepted Answer

The answer of Congress has divided the authority to police...

Question 4

Figure 15-16  Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16. Suppose the government regulates this industry in order to remove the inefficiency implied by the behavior of the profit maximizing owners. If regulators require that the firm produces the economically efficient output level, what is this level and what price will be charged?

Accepted Answer

The economically efficient output level is where the price equals marginal cost (P=MC). In the context of the options provided, Q4 units at P4 would typically represent this efficient point, assuming P4 is the price where the demand curve intersects the marginal cost curve.

Question 5

A product's price approaches its marginal cost as market concentration increases.

Accepted Answer

The answer of A product's price approaches its marginal cost...

Question 6

The Herfindahl-Hirschman Index is one factor used to determine whether a merger between two firms should be allowed. Which of the following statements regarding the value of the Index for a given industry is true?

Accepted Answer

The answer of The Herfindahl-Hirschman Index is one factor used...

Question 7

Figure 15-16  Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to figure 15-16. In the absence of any government regulation, the profit-maximizing owners of this firm will produce ________ units and charge a price of ________.

Accepted Answer

In the absence of government regulation, a profit-maximizing firm will produce where marginal cost (MC) equals marginal revenue (MR). This typically occurs at Q1 units and the corresponding price is P1.

Question 8

According to the Department of Justice merger guidelines, a proposed merger between two firms may be challenged if the post-merger Herfindahl-Hirschman Index

Accepted Answer

According to the Department of Justice merger guidelines, the post-merger Herfindahl-Hirschman Index is a measure of market concentration. If the pre-merger index is between 1,000 and 1,800, a merger will be challenged if it raises the index by more than 100 points. Thus, the correct answer is B.

Question 9

Holding everything else constant, government approval of horizontal mergers is more likely to be granted if the "market" that firms are in are broadly defined rather than narrowly defined.

Accepted Answer

Broadly defining the market makes it appear that there are more competitors, which can lessen concerns about potential monopoly power. Narrowly defining the market can make it appear that the merged firm would have a dominant market share, raising concerns about anti-competitive behavior.

Question 10

Merger guidelines developed by the U.S. Department of Justice and the Federal Trade Commission use the Herfindahl-Hirschman Index as a measure of concentration. This index measures concentration in an industry by

Accepted Answer

The Herfindahl-Hirschman Index calculates concentration in an industry by squaring the market shares of each firm in the industry and then adding up the values of the squares.

Question 11

Economists played a key role in the development of merger guidelines by the Department of Justice and the Federal Trade Commission in 1982. These guidelines have three main parts. What are these parts?

Accepted Answer

The three main parts of the merger guidelines developed by economists in 1982 are market definition, measure of concentration, and merger standards. These guidelines provide a framework for analyzing mergers and acquisitions to determine their potential impact on competition in the marketplace. Market definition involves identifying the relevant product and geographic markets in which a merger may have an impact. The measure of concentration is used to determine the level of competition in these markets, while the merger standards provide guidelines for assessing whether a proposed merger is likely to harm competition.

Question 12

The U.S. government would never approve a proposed merger between two firms that could significantly increase the newly merged firm's market power even if the efficiency gains from the newly merged firm could make consumers better off.

Accepted Answer

While the government may be hesitant to approve a merger that could significantly increase market power, they do weigh the potential efficiency gains and consumer benefits in their decision-making process. In some cases, a proposed merger with significant efficiency gains could be approved.

Question 13

Consider an industry that is made up of six firms with the following market shares: Firm A - 50%, Firm B - 20%, Firms C and D - 10% each, and Firms E and F - 5% each. What is the value of the Herfindahl-Hirschman Index and how will the industry be categorized?

Accepted Answer

The answer of Consider an industry that is made up...

Question 14

Figure 15-16  Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16. If the regulators of the natural monopoly allow the owners of the firm to break even on their investment, the firm will produce an output of ________ and charge a price of ________.

Accepted Answer

The answer of Figure 15-16  Figure 15-16 shows the...

Question 15

Beginning in 1965, the head of the Antitrust Division of the U.S. Department of Justice began to change antitrust policy. How did antitrust policy change?

Accepted Answer

The answer of Beginning in 1965, the head of the...

Question 16

Figure 15-16  Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16. Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

Accepted Answer

The answer of Figure 15-16  Figure 15-16 shows the...

Question 17

Which two factors make regulating mergers complicated?

Accepted Answer

Regulating mergers can be complicated because it may not be clear which market the firms operate in and the newly merged firm may have increased efficiency, making it hard to determine the potential impact on competition.

Question 18

Baxter International, a manufacturer of hospital supplies, acquired American Hospital Supply, a distributor of hospital supplies. This is an example of

Accepted Answer

This is a vertical merger because Baxter International, the manufacturer, is merging with American Hospital Supply, the distributor, which is a type of supplier. This merger combines two different stages of the supply chain.

Question 19

Merger guidelines developed by the Antitrust Division of the U.S. Department of Justice use four-firm concentration ratios as measures of concentration.

Accepted Answer

The answer of Merger guidelines developed by the Antitrust Division...

Question 20

If a firm is a natural monopoly, competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit. How are prices usually set in natural monopoly markets in the United States?

Accepted Answer

In the United States, local or state regulatory commissions usually set prices for natural monopolies. These commissions are responsible for ensuring that the firm is not charging excessive prices while still allowing it to earn a reasonable rate of return on its investments. This form of government regulation helps prevent the natural monopoly from generating excessive profits at the expense of consumers.

Quiz 15: Monopoly and Antitrust Policy

A vertical merger is one that takes place between two companies producing different goods or services for one specific finished product.

A horizontal merger

Congress has divided the authority to police mergers between the Antitrust Division of the U.S. Department of Justice (AD) and the Federal Trade Commission (FTC) . How is this authority divided?

A product's price approaches its marginal cost as market concentration increases.

The Herfindahl-Hirschman Index is one factor used to determine whether a merger between two firms should be allowed. Which of the following statements regarding the value of the Index for a given industry is true?

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to figure 15-16. In the absence of any government regulation, the profit-maximizing owners of this firm will produce units and charge a price of .

According to the Department of Justice merger guidelines, a proposed merger between two firms may be challenged if the post-merger Herfindahl-Hirschman Index

Holding everything else constant, government approval of horizontal mergers is more likely to be granted if the "market" that firms are in are broadly defined rather than narrowly defined.

Merger guidelines developed by the U.S. Department of Justice and the Federal Trade Commission use the Herfindahl-Hirschman Index as a measure of concentration. This index measures concentration in an industry by

Economists played a key role in the development of merger guidelines by the Department of Justice and the Federal Trade Commission in 1982. These guidelines have three main parts. What are these parts?

The U.S. government would never approve a proposed merger between two firms that could significantly increase the newly merged firm's market power even if the efficiency gains from the newly merged firm could make consumers better off.

Consider an industry that is made up of six firms with the following market shares: Firm A - 50%, Firm B - 20%, Firms C and D - 10% each, and Firms E and F - 5% each. What is the value of the Herfindahl-Hirschman Index and how will the industry be categorized?

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16. If the regulators of the natural monopoly allow the owners of the firm to break even on their investment, the firm will produce an output of and charge a price of .

Beginning in 1965, the head of the Antitrust Division of the U.S. Department of Justice began to change antitrust policy. How did antitrust policy change?

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16. Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

Which two factors make regulating mergers complicated?

Baxter International, a manufacturer of hospital supplies, acquired American Hospital Supply, a distributor of hospital supplies. This is an example of

Merger guidelines developed by the Antitrust Division of the U.S. Department of Justice use four-firm concentration ratios as measures of concentration.

If a firm is a natural monopoly, competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit. How are prices usually set in natural monopoly markets in the United States?

Quiz 15: Monopoly and Antitrust Policy

A vertical merger is one that takes place between two companies producing different goods or services for one specific finished product.

A horizontal merger

Congress has divided the authority to police mergers between the Antitrust Division of the U.S. Department of Justice (AD) and the Federal Trade Commission (FTC) . How is this authority divided?

A product's price approaches its marginal cost as market concentration increases.

The Herfindahl-Hirschman Index is one factor used to determine whether a merger between two firms should be allowed. Which of the following statements regarding the value of the Index for a given industry is true?

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to figure 15-16. In the absence of any government regulation, the profit-maximizing owners of this firm will produce ________ units and charge a price of ________.

According to the Department of Justice merger guidelines, a proposed merger between two firms may be challenged if the post-merger Herfindahl-Hirschman Index

Holding everything else constant, government approval of horizontal mergers is more likely to be granted if the "market" that firms are in are broadly defined rather than narrowly defined.

Merger guidelines developed by the U.S. Department of Justice and the Federal Trade Commission use the Herfindahl-Hirschman Index as a measure of concentration. This index measures concentration in an industry by

Economists played a key role in the development of merger guidelines by the Department of Justice and the Federal Trade Commission in 1982. These guidelines have three main parts. What are these parts?

The U.S. government would never approve a proposed merger between two firms that could significantly increase the newly merged firm's market power even if the efficiency gains from the newly merged firm could make consumers better off.

Consider an industry that is made up of six firms with the following market shares: Firm A - 50%, Firm B - 20%, Firms C and D - 10% each, and Firms E and F - 5% each. What is the value of the Herfindahl-Hirschman Index and how will the industry be categorized?

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16. If the regulators of the natural monopoly allow the owners of the firm to break even on their investment, the firm will produce an output of ________ and charge a price of ________.

Beginning in 1965, the head of the Antitrust Division of the U.S. Department of Justice began to change antitrust policy. How did antitrust policy change?

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16. Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

Which two factors make regulating mergers complicated?

Baxter International, a manufacturer of hospital supplies, acquired American Hospital Supply, a distributor of hospital supplies. This is an example of

Merger guidelines developed by the Antitrust Division of the U.S. Department of Justice use four-firm concentration ratios as measures of concentration.

If a firm is a natural monopoly, competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit. How are prices usually set in natural monopoly markets in the United States?

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to figure 15-16. In the absence of any government regulation, the profit-maximizing owners of this firm will produce units and charge a price of .

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16. If the regulators of the natural monopoly allow the owners of the firm to break even on their investment, the firm will produce an output of and charge a price of .