Deck 4: Imperfect Competition: Is Big Business a Threat or a Boon

Question 1

An example of a horizontal merger might be

A) Microsoft merging with Exxon.
B) Microsoft merging with GM.
C) Microsoft merging with IBM.
D) All of the above.
E) None of the above.

Answer 1

C

Question 2

The argument that antitrust actions against large firms must be tempered by the fact of growing international competition is

A) advanced by both Conservatives and Liberals.
B) opposed by Liberals.
C) supported by Conservatives, Liberals, and Radicals.
D) supported only by Radicals.

Answer 2

A

Question 3

Since the election of Ronald Reagan in 1980, government policy toward big business has focused on

A) restraining the growth of multinational corporations.
B) restricting the growth of corporate assets.
C) promoting competition through the deregulation of industries and markets.
D) None of the above.
E) All of the above.

Answer 3

C

Question 4

Which of the following developments may have tended to slow down recent antitrust activity?

A) The decline in interest rates since the 1980s.
B) Continuing entrance of foreign competitors into U.S. markets.
C) Microsoft's purchase of smaller competitors.
D) All of the above.
E) None of the above.

Question 5

The vast majority of American businesses are classified as

A) small-sized businesses.
B) medium-sized businesses.
C) large businesses.
D) conglomerates.

Question 6

Most liberals would hold with which of the following policies in dealing with the monopoly problem?

A) Break up all concentrated industries.
B) Set specific limits on the amount of concentration in each industry.
C) Accept as a practical principle that social responsibility by business is sufficient by itself to restrain any monopoly exploitation.
D) Take each case on its own merits.

Question 7

Adam Smith believed that the tendency of businesses to take advantage of consumers would best be checked by

A) competition.
B) the church.
C) the state.
D) labor unions.
E) All of the above.
F) None of the above.

Question 8

According to the Radical argument, corporations must become large in order to

A) survive ruinous price wars.
B) impose their prices on the market.
C) have ample productive capacity and financial resources to acquire competitors.
D) All of the above.
E) None of the above.

Question 9

In the Radical view,

A) conglomerates have blunted capitalism's tendency toward the exploitation of workers.
B) monopolies can be controlled by the expansion of government regulations.
C) the concentration and centralization of business is a response to capitalism's own self-limiting and destructive tendencies.
D) the aggregate rate of profit has fallen due to the increase in small businesses.

Question 10

According to Table 4.1 (in the text) , the most concentrated industry by sales receipts is

A) agriculture.
B) mining.
C) manufacturing.
D) utilities.

Question 11

Conservatives claim that

A) monopolies do not exist.
B) small businesses need government support for job growth.
C) most antimonopoly efforts erode free enterprise.
D) Microsoft should be fined for restraint of competition.

Question 12

Republican administrations have pursued an antitrust policy

A) where the size of a business was the basic test for beginning antitrust actions.
B) that attempted to repeal the Sherman Anti-Trust Act.
C) that extended determination of "effective competition in a market" to include foreign competitors.
D) that has consistently opposed foreign conglomerate mergers.

Question 13

Radical's criticize the traditional microeconomic view of competition because it

A) presents an idealized, passive view.
B) ignores growth and accumulation as a firm's objective.
C) denies the long-term tendency for large firms to dominate any particular industry.
D) All of the above.
E) None of the above.

Question 14

Conservatives argue that mergers and combinations promote economic efficiency because of:

A) economies of scale.
B) higher prices.
C) a larger labor force.
D) better quality products.

Question 15

In recent times, all consolidations have resulted in either increased market share or profitability.

Question 16

Vertical mergers combine businesses from different industries.

Question 17

Radicals hold that conglomerate mergers pose a much bigger monopoly problem than is generally appreciated.

Question 18

Conservatives believe that low retail prices are dependent on a large number of competitors.

Question 19

If General Motors were to purchase XYZ Auto Headlight Company, this would be an example of a horizontal merger.

Question 20

According to the Conservative and Liberal paradigms, breaking up large corporations is the best route for restoring efficiency to American industry.

Question 21

Radicals argue that the increase in merger and acquisition activity are an exception to Marx's prediction about capitalist development.

Question 22

Ironically, both Conservatives and Radicals perceive the state as an instrument supporting further business concentration.

Question 23

According to the Liberal perspective, businesses act in a socially responsible way because it may enhance profitability.

Question 24

Under the law, it is illegal to conspire to monopolize but not to become a monopolist through acceptable and legal business behavior.

Question 25

Conservatives do not admit to the existence of any monopoly power in the American economy.

Question 26

All three paradigms would agree that firm size is a necessary, but not sufficient proof of monopoly power.

Question 27

Microsoft's stagnant stock price reflects its market prowess in the computer software market.