Question : 31) Why laws aimed at regulating monopolies called “antitrust” laws? A) : 1244621

31) Why are laws aimed at regulating monopolies called “antitrust” laws?

A) The rise of large firms (e.g., Standard Oil) in the late 1800s in the United States caused consumers to lose trust in private business.

B) “Trust” was a word in Old English that meant monopoly in the Middle Ages. Therefore, “antitrust” is a term that means “against monopoly.”

C) In the late 1800s, firms in several industries formed trusts; the firms were independent but gave voting control to a board of trustees. Antitrust laws were passed to regulate these trusts.

D) In the late 1800s, firms in several industries formed trusts; they were called “trusts” because when corporate officials were questioned about their business they would clam that business was good for the country and that they should trusted.

32) The U.S. Congress has given two government entities the authority to police mergers. These two entities are

A) the antitrust division of the Department of State and the Securities and Exchange Commission.

B) the Federal Trade Commission and the Internal Revenue Service.

C)  the Antitrust Division of the U.S. Department of Justice and the Council of Economic Advisors.

D) the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice.

33) A merger between firms at different stages of production of a good

A) is a vertical merger.

B) was made illegal by the Sherman Act.

C) was made legal by the Clayton Act.

D) is a horizontal merger.

34) A horizontal merger

A) is a merger between firms in the same industry.

B) results in a trust (for example, the Standard Oil Company).

C) is a merger between firms at different stages of production of a good.

D) was illegal in the United States until the Federal Trade Commission Act was passed by Congress in 1914.

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

A) a conglomerate merger.

B) a horizontal merger.

C) a vertical merger.

D) a two-dimensional merger.

36) 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) The AD decides whether proposed horizontal mergers will be challenged; the FTC decides whether proposed vertical mergers will be challenged.

B) Both the AD and the FTC are responsible for merger policy.

C) The AD always renders its opinion on any proposed merger first. If the AD approves the merger, the case then goes to the FTC for final approval. If the AD disallows the merger, the decision stands and the FTC does not become involved.

D) The AD establishes the guidelines that are used to evaluate proposed mergers; the FTC uses these guidelines to decide whether a proposed merger will be allowed to take place.

37) Which two factors make regulating mergers complicated?

A) First, firms may lobby government officials to influence their decision to approve the merger. Second, by the time the government officials reach a decision regarding the merger, the firms often decide not to merge.

B) First, the time it takes to reach a decision to approve a merger is so long that the firms often have new owners and mangers. Second, by law, government officials are not allowed to consider the impact of foreign trade (exports and imports) on the degree of competition in the markets of the merged firms.

C) First, the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice must both approve mergers. Second, the concentration ratios that are used to evaluate the degree of competition the merged firms face are flawed.

D) First, it is not always clear what market firms are in. Second, the newly merged firm might be more efficient than the merging firms were individually.

38) 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?

A) For the first time horizontal mergers were allowed—with government approval—and vertical mergers were allowed without need for approval from the government.

B) For the first time concentration ratios were used to evaluate the degree of competition in the industries of firms that proposed mergers.

C) The Division began to systematically consider the economic consequences of proposed mergers.

D) Proposed mergers no longer needed the approval of the Federal Trade Commission or the court system.

39) 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?

A) concentration ratios; the Herfindahl-Hirschman Index; market standards

B) concentration standards; concentration ratios; competitive analysis

C) economic analysis; political analysis; dynamic analysis

D) market definition; measure of concentration; merger standards

40) 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

A) adding up the market shares of all firms in the industry, squaring this number and then dividing by the number of firms in the industry.

B) squaring the market shares of each firm in an industry and then adding up the values of the squares.

C) squaring the four-firm concentration ratio of the industry and dividing this number by the total number of firms in the industry.

D) determining the market shares of the four largest firms in the industry, but unlike the concentration ratio, the Index includes sales in the United States by foreign firms.