Question : 32) A group of firms in Sunnyvale have a complaint : 1241320

32) A group of firms in Sunnyvale have a complaint about one of their competitors. They charge that Big Box Building Supply charges such low prices that they can’t stay in business. Which of the following is the most likely response from an economist?

A) Big Box Building Supply isn’t engaged in predatory pricing because new firms can always enter and compete away any monopoly profits.

B) Big Box Building Supply is engaged in price fixing and should be prosecuted for violating antitrust law.

C) The firms have a valid complaint against Big Box Building Supply because it is engaged in resale price maintenance.

D) The firms don’t have a valid complaint against Big Box Building Supply because it is operating like a natural monopoly.

E) Big Box Building Supply is engaged in resale price maintenance but most likely is providing efficient service.

33) The government believes that which entry barrier has allowed Microsoft to gain monopoly power?

A) ownership of the entire supply of a resource

B) patents

C) trademarks

D) economies of scale and network economies

E) territorial confinement

34) The U.S. courts found Microsoft

A) did not violate antitrust law.

B) violated the Sherman Act.

C) violated the Cellar-Kefauver Act.

D) engaged in predatory pricing.

E) violated the price discrimination clause of the Clayton Act.

35) If the Herfindahl-Hirschman Index in an industry is above 1,800, a merger that increases the Herfindahl-Hirschman Index by over 50 points will

A) be allowed by the government.

B) be challenged by the government.

C) be encouraged by the government.

D) increase competition in that industry.

E) never be allowed to happen.

36) The Federal Trade Commission uses ________ to help determine whether to challenge a possible merger.

A) the Sherman Act

B) the Clayton Act

C) the Herfindahl-Hirschman Index

D) the antitrust law of natural monopolies

E) the four-firm concentration ratio

37) If an industry has a Herfindahl-Hirschman index of 800, it is considered a

A) competitive market.

B) moderately concentrated market.

C) concentrated market.

D) monopoly.

E) small market.

38) If the Herfindahl-Hirschman Index (HHI) for a market is between 1,000 and 1,800, the Federal Trade Commission will examine

A) all mergers.

B) no mergers.

C) mergers that raise the HHI by 100 or more points.

D) mergers that raise the HHI by 100 or fewer point.

E) mergers that lower the HHI by 100 or more points.

39) Suppose there are 6 firms in an industry with the following market shares. If the two smallest firms want to merge, how will the Federal Trade Commission reply?

Firm 1:30

Firm 2:25

Firm 3:25

Firm 4:10

Firm 5: 7

Firm 6: 3

A) The firms will be allowed to merge and compete with the larger firms.

B) The firms will be challenged because the merger will raise the HHI by more than 50 points.

C) The firms will not be allowed to merge.

D) The firms will be challenged because the merger will raise the HHI by more than 100 points.

E) The firms will be challenged because the merger will raise the HHI by more than 250 points.

40) Federal Trade Commission guidelines state that it will examine mergers in markets for which the Herfindahl-Hirschman Index is

A) a positive number.

B) below 1,000 points.

C) between 1,000 and 1,800, and the merger would reduce the index by 100 points.

D) between 1,000 and 1,800, and the merger would increase the index by 100 points.

E) more than 1,800.

41) Suppose that an industry has an HHI of 1,900. Two firms in the industry want to merge. Under which conditions will the Federal Trade Commission challenge the merger?

A) The market is considered competitive, so the merger will not be challenged.

B) The merger will be challenged if it raises the HHI by 100 or more points.

C) The merger will be challenged if it raises the HHI by 50 or more points.

D) The merger will be challenged if it raises the HHI by 200 or more points.

E) The merger will be challenged if it raises the HHI by 500 or more points.