Question 1

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 Antitrust Division of the U.S. Department of Justice began to systematically consider the economic consequences of proposed mergers, which was a significant change in antitrust policy. This means that mergers were no longer evaluated solely based on the size of the companies involved, but rather on the potential effects on competition and consumers. The other answer choices are incorrect: A is not true, as horizontal mergers still required government approval and vertical mergers were already allowed without approval; B is also not true, as concentration ratios were not a new concept and were already being used before 1965; and D is not true, as the FTC and court system continued to play a role in the approval process for mergers.

Question 2

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 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

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. The guidelines aim to provide a framework for analyzing the competitive effects of mergers and acquisitions on the market. Market definition involves determining the specific product and geographic markets that are affected by a merger. The measure of concentration involves calculating market share and concentration ratios to determine the level of competitiveness in the market. Finally, the merger standards provide guidelines for assessing whether a merger would significantly harm competition.

Question 5

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, a post-merger Herfindahl-Hirschman Index between 1,000 and 1,800 is moderately concentrated, and a merger that raises the index by more than 100 points is presumed to enhance market power and cause competitive harm. Therefore, option B, which states that a merger may be challenged if the post-merger Herfindahl-Hirschman Index lies between 1,000 and 1,800 and the merger raises the Index by more than 100 points, is the correct choice.

Question 6

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 7

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

Accepted Answer

A vertical merger occurs when a company acquires another company in the same industry, but at a different stage of the supply chain. In this case, Baxter International acquired American Hospital Supply, a distributor of its hospital supplies, making it a vertical merger.

Question 8

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

Local or state regulatory commissions usually set prices for natural monopolies. These commissions are responsible for ensuring that prices are fair and reasonable for consumers, while also allowing the natural monopoly to earn enough revenue to cover its costs and earn a reasonable return on investment. This approach provides a balance between protecting consumers and allowing for the benefits of a natural monopoly, such as economies of scale and efficient production.

Question 9

A horizontal merger

Accepted Answer

A horizontal merger is a type of merger between firms operating in the same industry, for example, two automobile manufacturers merging together. This type of merger can lead to market consolidation and reduce competition in the industry.

Question 10

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 11

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

When regulators allow a natural monopoly to break even, the firm produces where average total cost (ATC) equals demand, which is typically at Q3 and P3 in such diagrams.

Question 12

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 13

Which two factors make regulating mergers complicated?

Accepted Answer

The answer of Which two factors make regulating mergers complicated?
...

Question 14

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 Q4, where marginal cost equals marginal benefit. The price charged will be P4, which is the price that consumers are willing to pay for this output level.

Question 15

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

This statement is false. The government may approve a proposed merger between two firms even if it could increase the newly merged firm's market power, as long as the efficiency gains from the merger would outweigh any negative effects on consumers. The government considers many factors when reviewing mergers, including potential harm to competition and consumer welfare, as well as potential benefits such as increased efficiency and innovation.

Question 16

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

When a market is narrowly defined, there are fewer players in the industry and therefore a horizontal merger would result in a significant reduction in competition. This is likely to trigger antitrust concerns and hence make it more difficult for government approval. However, if the market is broadly defined, there are more players in the industry and therefore a horizontal merger would not significantly reduce competition, making it more likely for government approval.

Question 17

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 18

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 measures 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 19

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 20

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

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

Quiz 15: Monopoly and Antitrust Policy

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?

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?

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?

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?

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

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

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

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?

A horizontal merger

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

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 .

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

Which two factors make regulating mergers complicated?

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.

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.

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?

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

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?

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 .

Quiz 15: Monopoly and Antitrust Policy

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?

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?

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?

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?

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

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

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

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?

A horizontal merger

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

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 ________.

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

Which two factors make regulating mergers complicated?

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.

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.

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?

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

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?

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 .

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 .