Deck 18: Big Business and Government Intervention

Question 1

Even though government-operated firms do not have to make a profit,they usually operate efficiently.

Answer 1

False

Question 2

The three acts that form the basic machinery behind the U.S.anti-trust laws are the Sherman Act?of 1890,the Federal Trade Commission Act of 1914,and the Robinson Patman Act of 1836.

Answer 2

False

Question 3

The U.S.experience with the rise and fall of its railroad industry illustrates that central planners are less likely than private investors to allocate investment funds into wealth-creating projects.

Answer 3

True

Question 4

The Sherman Antitrust Act of 1890 was followed almost immediately in the 1890s by the largest merger movement ever known by Americans up to that point in U.S.history.

Question 5

The Sherman Antitrust Act of 1890 was not well understood because

A) skilled lawyers were not involved in its creation.
B) judges were mainly political hacks and therefore were unable to follow the logic of the Act.
C) vested interests had been allowed too much influence in drafting the legislation.
D) the purpose of the legislation was not sufficiently clear when it was drafted.

Question 6

Fears that the Munn v Illinois (1877)doctrine would result in excessive government control over businesses were not realized,for it actually had the effect of retarding government regulation.

Question 7

What was the Federal Trade Commission (FTC),established in 1914,created to enforce?

A) U.S. foreign trade
B) The maritime code
C) The Interstate Commerce Act
D) The antitrust laws

Question 8

Research in history and economic history shows that before 1880,significant federal participation?in the markets of the American economy occurred.

Question 9

Up until the early 1880s,there was no federal control over private activities.

Question 10

Interstate Commerce Commission (ICC)Act of 1887 gave the federal government rate-setting powers.

Question 11

The real purpose of the Webb-Pomerene Act of 1918 was to alter the terms of trade in favor of the United States.

Question 12

The Webb-Pomerene Act of 1918 prohibits price fixing and other anticompetitive agreements that pertain solely to goods for export.

Question 13

In the pivotal Supreme Court decision Munn v Illinois (1877),the court held that only natural monopolies were subject to federal government regulation.

Question 14

According to Alfred Chandler (1977),big business could be justified,at least in part,by the ability?of large scale enterprises to take advantage of scale economies.

Question 15

Albro Martin (1971)argues that the Interstate Commerce Commission (1887-1995)was

A) never a case of "capture."
B) "captured" by the railroads themselves.
C) "captured" by the customers of the railroads.
D) too ineffective to warrant "capture" by anyone.

Question 16

In Nebbia v New York (1934),the doctrine of Munn v Illinois (1877)

A) was held to be irrelevant.
B) was upheld for all cases.
C) was upheld for interstate commerce.
D) was overturned explicitly.

Question 17

Albro Martin (1971)argues that the Interstate Commerce Commission (1887-1995)was captured by its customers,not the railroad industrialists.Other researchers like Gabriel Kolko (1965)highlight the involvement of railroad industrialists in capturing this government agency to serve a cartel role,too.

Question 18

The Sherman Antitrust Act of 1890

A) did not specify what economic actions are legal.
B) said that only competitive economic actions were legal.
C) declared illegal every combination in restraint of trade.
D) declared none of the above.

Question 19

The organized groups of people who favor government intervention do so at the expense of other groups because even government resources are limited.

Question 20

As a result of the case of Dartmouth College v Woodward (1819),the Federal Trade Commission was formed years later in 1914.

Question 21

Since colonial times,the U.S.government controlled businesses at some level by:

A) letting market actions and interactions between private consumers and producers drive decisions
B) regulating, licensing and closing them.
C) protecting private property rights.
D) providing national defense.

Question 22

The Sherman Act of 1890 and the Clayton Act of 1914 were Antitrust Acts whose purposes included all of the following except

A) The maintenance of a competitive economy
B) The prevention of monopolies, combinations and other conspiracies in restraint of trade
C) The prevention of price discrimination that reduces competition
D) The prevention of labor union activity that reduces competition in the labor market

Question 23

Two court cases that applied to the regulation of business were Munn v Illinois (1877)and?Nebbia v New York (1934).Regarding these two cases,which of the following is true?

A) The former case, in effect, gave the federal government more comprehensive powers ?to regulate business than the latter case.
B) The latter case gave the federal government more comprehensive powers to regulate ?business.
C) Both cases were equally important in giving the federal government powers to ?regulate business.
D) Neither case was very important with regard to federal regulation of business but set ?a precedent for later, more important court cases.

Question 24

Research in history and economic history shows that before 1880,

A) there was some government intervention in the private sector of the American economy.
B) there was substantial federal regulation of private business organization but little influence?in the economy otherwise.
C) the regulation and participation that existed were usually of a background nature and were not concerned with the details of day-to-day private business.
D) laissez faire was the rule so far as the federal government was concerned.

Question 25

Between 1860 and 1914,the concentration of industrial power did increase.What did members of the general public perceive to be the result of this heavy concentration?

A) Expanded output
B) Lower prices
C) A transfer of income away from consumers ?toward big businesses
D) All of the above

Question 26

The long-term impact of Munn v Illinois (1877)on regulatory efforts was

A) to hold back federal efforts to regulate business.
B) to prevent states from regulating interstate trade.
C) to provide a temporary justification for regulating business.
D) to establish government as able to regulate all businesses permanently.

Question 27

What was the first federal government agency established to regulate business?

A) The Federal Trade Commission
B) The Securities and Exchange Commission
C) The Federal Power Commission
D) The Interstate Commerce Commission

Question 28

The major problem with the Sherman Antitrust Act of 1890 was that

A) it was struck down by the Supreme Court.
B) the government lacked the tools to enforce it.
C) its language was too vague to be applied the ways desired by Congress.
D) businesses found ways to use the Act clearly in their favor.

Question 29

According to Alfred Chandler (1977),big business could be justified,at least in part,by

A) a rapid rate of innovation among big firms.
B) periodic recessions in which alert big businessmen buy out bankrupt firms and expand operations.
C) a relatively low rate of bankruptcies among big firms.
D) its ability to take advantage of scale economies-big business could best take advantage?of technology and economies resulting from large-scale production processes.

Question 30

Scherer (1970)provides which of the following argument(s)to explain the appearance of antitrust laws?

A) Many farmers believed that the growth of big business came at the expense of growth in agriculture.
B) Many ordinary individuals with moderate or low incomes were envious of the fame ?and wealth accumulated by the relatively few industrial entrepreneurs.
C) Falling costs in transportation resulted in growth of the optimal size of the firm.
D) All of the above.

Question 31

In the pivotal Supreme Court decision Munn v Illinois (1877),the court held that

A) natural monopolies were subject to government regulation.
B) business in interstate commerce was subject to regulation.
C) any business, whether or not a natural monopoly, or whether or not it was in interstate ?commerce, may under certain circumstances be subject to regulation.
D) only businesses chartered (licensed) by governments could be subjected to government regulation.

Question 32

Why was the Munn v Illinois (1877)court case particularly important with regard to government regulation?

A) It upheld the traditional right of businesses to act freely without interference by government.
B) It established the right of government at any level to regulate any business activity if it was deemed desirable for any reason.
C) It established the right of government to regulate any and all businesses wherever it was deemed desirable to promote competition.
D) It established the right of government to regulate any business that had become "clothed in the public interest."

Question 33

Which of the following was NOT a part of Chandler's (1977)description of the rise of big business?in the 19th century?

A) Vertical integration of firms
B) The development of mass production
C) The development of mass distribution
D) The use of central planning to improve production techniques

Question 34

What is the function of the system of federal regulation created by Congress from 1887 until now?

A) To change the outcomes of market decisions
B) To enforce the outcomes of market decisions
C) To replace market allocations with economic planning
D) To enforce the law

Question 35

Prior to the 1880s,federal government control over the daily operations of private economic activity

A) was important but not as important as during the 1880s and following decades.
B) was virtually nonexistent; state and local governments handled any regulation or business management.
C) was important, but in the 1880s and following decades, it became less important as it was realized that regulation was basically inconsistent with the efficient operation of free markets.
D) was virtually nonexistent and did not become important until the Great Depression and New Deal programs of the 1930s.

Question 36

According to Chandler (1977),the major event in business development in 1895-1904 was

A) the Granger cases.
B) Munn v Illinois (1877).
C) the rise of vertically integrated firms.
D) the merger wave.

Question 37

The Sherman Antitrust Act of 1890

A) was intended by Congress to prevent monopoly actions by both business and labor organizations.
B) was intended by Congress to prevent monopoly actions by business only, but was also used by the courts as a weapon against labor unions.
C) was intended as a measure to control unions but was also used by the courts to control business.
D) was intended to prevent monopoly actions by business only and was never used by the courts against unions.

Question 38

How does the federal government influence the flow of goods and services into the country and,consequently,create extra profitability or rents in domestic production that would not have been ?there under free market conditions?

A) tariffs
B) minimum wage laws
C) control of the public domain
D) federal income taxes

Question 39

In which case did the U.S.Supreme Court decide the Constitution was "intended to endure for ages to come and,consequently,to be adapted to various crises of human affairs"?

A) Nebbia v New York (1934)
B) Munn v Illinois (1877)
C) McCulloch v Maryland (1819)
D) Dartmouth College v Woodward (1819)

Question 40

Andrew Carnegie dominated the steel industry on the basis of the Bessemer converter.This technology permitted unskilled men to produce large quantities of steel at relatively low costs.?This technology was

A) invented by Carnegie.
B) stolen from the British inventor Bessemer.
C) acquired legally from the British inventor Bessemer.
D) imported from Germany.

Question 41

Why do some individuals argue that federal government intervention was necessary to establish?a system of checks and balances over the economic power of big businesses?

Question 42

Since colonial times,the U.S.government controlled businesses at some level by:

A) letting market actions and interactions between private consumers and producers drive decisions
B) regulating, licensing and closing them.
C) protecting private property rights.
D) providing national defense.

Question 43

The corporation,as a form of business organization,fueled the positive trend toward federal regulation of business activities for all of the following reasons except

A) Corporations were rapidly becoming more numerous than sole proprietorships and partnerships.
B) Corporations made possible or encouraged growth in the number of giant enterprises.
C) Corporations were adept at market manipulations, including price-fixing.
D) Corporations were able to take advantage of economies of scale which made possible business organizations whose affairs overlapped local or state jurisdictions, creating the need for federal control across state lines.

Question 44

Compare and contrast the views of Schumpeter (1939,1976)and Chandler (1977)on the relationship between innovation and a successful business firm.Identify what they have in common and describe their differences.

Question 45

In which of the following cases did the U.S.Supreme Court decide that a corporation was an "individual" but not a constitutional citizen?

A) Nebbia v New York (1934)
B) Munn v Illinois (1877)
C) McCulloch v Maryland (1819)
D) Dartmouth College v Woodward (1819)

Question 46

Describe the Sherman Antitrust Act of 1890 and the Clayton Act of 1914.Why was the Clayton Act necessary?

Question 47

How does the federal government influence the flow of goods and services into the country and,consequently,create extra profitability or rents in domestic production that would not have been ?there under free market conditions?

A) tariffs
B) minimum wage laws
C) control of the public domain
D) federal income taxes

Question 48

"Government action is based on majority rule,whereas market action is based on mutual consent.The competitive marketplace allows for proportional representation of each individual.However,minority or unorganized groups must yield to the views of the political majority when activities are undertaken through government." Explain what this statement means and illustrate by using the events leading up to the establishment of the Interstate Commerce Commission (ICC)in 1887 and passing of the Hepburn Act of 1906.

Question 49

Will central planners or private investors be more likely to allocate investment funds into wealth-creating projects? Explain by illustrating the rise and fall of the railroad industry.

Question 50

What is the Interstate Commerce Commission (ICC)Act of 1887? When did the ICC acquire the power to set transportation rates? Why did some individuals argue that it served as a cartel manager? Why did others claim that the ICC served the interest of customers over those of the regulated businesses? Discuss the controversy.

Question 51

Describe the significance of the changes in federal government control over markets between 1887 and 1914 in U.S.

Question 52

Why do some economists argue that recessions are partly responsible for a rise in the number of collusive agreements among businesses and merged firms?

Question 53

Lamoreux's (1985)research finds that between 1895 and 1904,the manufacturing market was dominated by big businesses.They accounted for over 70 percent of the output produced.Lamoreux credits three historic events for this phenomenon.Identify and describe these three events.

Question 54

What are economies of scale? How are they related to giant enterprises?

Question 55

Describe the role of the rise of giant enterprises in economic growth and development assigned?by Chandler (1977).

Question 56

In the struggle to control the power of big business which emerged between the Civil War and?World War I,the nation

A) relied heavily on the principles of government expounded by the Founding Fathers such as Thomas Jefferson.
B) slowly changed into the modern regulated economy.
C) decided ultimately that big business was here to stay and should be allowed to operate without government interference.
D) began a policy of government ownership of business in important sectors of the economy.

Question 57

A "great merger movement," whereby firms combined with former rivals to become large firms,began in the 1890s.Who was the first President to look to bigger government as a way to cope with the economic power of these concentrated industries?

A) Woodrow Wilson
B) Herbert Hoover
C) Theodore Roosevelt
D) Franklin Roosevelt

Question 58

Discuss the economic importance of the case of Munn v Illinois (1877).