ch 11

___________ give government the power to block certain mergers, and in some cases, to break up large firms into smaller ones.

Antitrust laws

There have been two especially important shifts in how markets are defined in recent decades: one involves _________________ and the other involves _______________.

technology; globalization

Government passed the _____________________ to limit the power of large, consolidated firms that were run by trustees as if they were a single firm.

Correct!

Sherman Act in 1890

The statistical models currently used by competition regulators do require some degree of ____________, and can become the subject of _________ between the antitrust

authorities and the companies that wish to merge

subjective judgment; legal disputes

Which of the following has the power to allow a merger, prohibit it, or allow it if certain conditions are met

Department of Justice

Which of the following poses a difficult challenge for U.S. competition policy?

natural monopoly

The term __________ refers to the percentage share of a firm's total sales in the market.

market share

The implicit assumption that competitive conditions across industries are similar enough to make a decision about the effects of a merger is

a weakness of the concentration ratio analysis method.

What was created by the U.S. government in 1914 to specifically define what types of competition were legally unfair?

Federal Trade Commission

City Gas is a natural monopoly that supplies natural gas to a particular city. Its cost and demand information are given below.

loss of $33 million, will not

Antitrust laws were created to give government the power to

block certain mergers and break up large firms into smaller ones.

City Gas is a natural monopoly that supplies natural gas to a particular city. Its cost and demand information are given below.

$20 million

JustMeInc. is the only provider of high speed internet in Tinytown. The firm charges their customers on an annual basis. Its cost and demand information are given below.

$160 million

Which of the following concerns would groups like the Consumer Federation of America and Public Knowledge most likely raise with regulators considering a merger application?

the merger would reduce competition

A business_____________occurs when, for practical purposes, one firm purchases another.

acquisition

Antitrust law includes specific rules against restrictive practices in particular because

their effects can reduce competition.

What is the maximum value that can be reached using the HHI?

10,000

A local regulator has calculated the average cost of production for the public water utility. The regulator has allowed an adjustment for the normal rate of profit the firm should expect to earn, and then set the price that consumers can be charged accordingly. In this instance, the regulator has used which of the following?

cost-plus regulation

City Gas is a natural monopoly that supplies natural gas to a particular city. Its cost and demand information are given below.

fall, rise

Regulations that permit a regulated firm to cover its costs and to make a normal level of profit are commonly referred to as

cost-plus regulation.

Government policy-makers often must decide how to balance the potential benefits of _____________ against the potential benefits of _______________.

corporate size; competition

Antitrust law includes specific rules against restrictive practices in particular because

their effects can reduce competition.

Following the commencement of deregulation of US airline industry in the 1970s, reduced airfares saved consumers billions of dollar a year.

The more recent string of airline mergers has, however,

raised new concerns over how competition in the industry can once again be strengthened.

The implicit assumption that competitive conditions across industries are similar enough to make a decision about the effects of a merger is

a weakness of the concentration ratio analysis method.

If an industry is perfectly competitive or monopolistically competitive, then the government has relatively little reason for concern about

the extent of competition.

If two companies are seeking regulatory approval to merge their respective businesses, which of the following will most likely be the focus of the arguments that they will present in favor of the merger?

the new firm will produce more efficiently and all of the above

What is the maximum value that can be reached using the HHI?

10,000

In competitive settings, profits will lead firms to _______ and losses will lead firms ____________, so the incentives for producing at low cost and coming up with new ways of pleasing customers are strong.

enter the market; to exit

Which of the following concerns would groups like the Consumer Federation of America and Public Knowledge most likely raise with regulators considering a merger application?

the merger would reduce competition

The information below sets out the estimated market shares for the cellular phone manufacturing market are given in the table below.

1,884

A manufacturer that only allows a consumer to purchase one product if they also buy another product is using _____________ to increase its profits.

tie-in sales

Which of the following denotes a weakness that is common to both the four firm concentration ratio and the HHI?

assuming the subject market is well-defined relative to measuring how sales are divided within it.

Which of the following is a true statement?

The government approves most proposed mergers.

The term _____________ is used to describe circumstances where government takes

over ownership of a business.

nationalization

Practices that reduce competition without actual documented agreements between firms to raise price are commonly referred to as ______

restrictive practices

Why would regulators find that a proposed merger is likely to lessen competition?

it can lead to lower quality products

In the US, which of the following has likely been the most influential with respect to the increased level of competition faced by many local retail businesses?

globalization and all of the above

The term __________ refers to the percentage share of a firm's total sales in the market.

market cap

City Gas is a natural monopoly that supplies natural gas to a particular city. Its cost and demand information are given below.

profit, $24 million

Splitting up a natural monopoly held by a public utility that produces and provides electricity would

raise the average cost of production and force consumers to pay more.

Antitrust laws were created to give government the power to

block certain mergers and break up large firms into smaller ones.

If an industry is perfectly competitive or monopolistically competitive, then the government has relatively little reason for concern about

the extent of competition.

Which of the following concerns would groups like the Consumer Federation of America and Public Knowledge most likely raise with regulators considering a merger application?

the merger would reduce competition

The term "tie-in sales" is synonymous with

There have been two especially important shifts in how markets are defined in recent decades: one involves _________________ and the other involves _______________.

City Gas is a natural monopoly that supplies natural gas to a particular city. Its cost and demand information are given below.

profit, $24 million

The Herfindahl-Hirschman index is calculated by taking ___________, squaring it, and adding them up to get a total.

market share of each firm in the industry

Government passed the _____________________ to limit the power of large, consolidated firms that were run by trustees as if they were a single firm.

Sherman Act in 1890

The US Federal Trade Commission justifies their record of approval of most mergers by asserting that, even though competition is diminished by consolidating two firms into one, mergers actually benefit

competition and consumers by allowing firms to operate more efficiently

Following the commencement of deregulation of US airline industry in the 1970s, reduced airfares saved consumers billions of dollar a year.

The more recent string of airline mergers has, however,

raised new concerns over how competition in the industry can once again be strengthened.

Which of the following poses a difficult challenge for U.S. competition policy?

natural monopoly

The concept of restrictive practices in the U.S. market economy is ____________.

continually evolving

The four-firm __________ measures the percentage share of the total sales in the industry that is accounted for by the largest four firms.

concentration ratio

The statistical models currently used by competition regulators do require some degree of ____________, and can become the subject of _________ between the antitrust

authorities and the companies that wish to merge.

subjective judgment; legal disputes

The term _____________ refers to a situation where the firms supposedly being regulated end up playing a large role in setting the regulations that they will follow.

regulatory capture

JustMeInc., is the only provider of high speed internet in Tinytown. The firm charges its customers on an annual basis. The firm's cost and demand information are given below.

$210

Which of the following has the power to allow a merger, prohibit it, or allow it if certain conditions are met?

Department of Justice

Which of the following is a valid criticism of the reduction of competition that results from corporate mergers?

merged firms can increase price and maintain permanently higher profits

For the restaurant industry in Seattle, with dozens or hundreds of extremely small competitors, the value of the HHI

 

might drop as low as 100 or even less.

The term _____________ is used to describe circumstances where government takes

over ownership of a business.

nationalization