Multiple Choice Answers

1.) Which one of the following acts declared “Every contract, combination … or conspiracy, in restraint of trade or commerce among the several states … to be illegal”? A. the Wheeler-Lea Act B. the Federal Trade Commission Act C. the Sherman Act D. the Interstate Commerce Act 2.) The Clayton Act of 1914: A. outlawed price discrimination, tying contracts, intercorporate stockholding, and interlocking directorates that lessen competition. B. prohibited unfair or deceptive acts or practices in commerce that tend to reduce competition. C. outlawed vertical and conglomerate mergers. D. prohibited one firm from acquiring the assets of another when the effect was to limit competition. 3.) A function of the Federal Trade Commission is to: A. investigate instances of faulty and misleading advertising. B. establish railway rates for interstate railroads. C. ban or recall unsafe consumer products. D. prevent insider trading in securities markets. 4.) Which one of the following is not prohibited by the original Clayton Act? A. the purchase of the stocks of rival firms that lessens competition B. the purchase of the assets of rival firms that lessens competition C. an exclusive dealer or tying agreements that lessen competition D. price discrimination that lessens competition 5.) The government was successful in gaining an antitrust conviction in the: A. U.S. Steel case. B. IBM case. C. Alcoa case. D. DuPont cellophane case. 6.) Which of the following laws prohibited mergers by stock acquisition if the effect was to lessen competition? A. Celler-Kefauver Act of 1950 B. Wheeler-Lea Act of 1938 C. Clayton Act of 1914 D. Sherman Act of 1890 7.) Tying agreements: A. establish common boards of directors for previously competing firms. B. obligate a purchaser of product X to also buy product Y from the same seller. C. allow manufacturers to specify the retail prices of their products. D. prohibit firms from selling their products outside of specified geographic areas. 8.) The main purpose of the antitrust laws is: A. to encourage firms to produce where P > MC. B. the elimination of both negative and positive externalities. C. to prevent the monopolization of industries. D. to regulate natural monopolies. 9.) In which of the following cases did the final court decision result in a breakup of the firm into competing businesses? A. Microsoft case B. Standard Oil case C. U.S. Steel case D. DuPont cellophane case. 10.) The rule of reason indicated that: A. if less than four firms account for three-fourths of an industry’s sales, the industry is in violation of the Sherman Act. B. social regulation should not be enforced unreasonably so that costs exceed benefits. C. the mere possession of monopoly power is a violation of the antitrust laws. D. only contracts and combinations that unreasonably restrain trade violate the antitrust laws. 11.) In the Alcoa case of 1945 the courts held that: A. the mere possession of monopoly power is a violation of the antitrust laws. B. only contracts and combinations that unreasonably restrain trade are in violation of the Sherman Act. C. retail and wholesale firms are exempt from antitrust legislation. D. firms which sell more than one-half of their output overseas are exempt from antitrust. 12.) A merger between an automobile manufacturer and a maker of automobile tires is an example of a: A. conglomerate merger. B. horizontal merger. C. vertical merger. D. tying contract. 13.) Which of the following would, other things equal, increase the demand for U.S. farm products? A. bumper crops abroad B. depreciation of the U.S. dollar C. deteriorating trade relations with China and Russia D. increases in foreign tariffs on imported farm products 14.) A bumper crop of farm products causes: A. only a slight decline in the price of farm products because the demand for farm products is income inelastic. B. a large decline in the price of farm products because the demand for farm products is price inelastic. C. only a slight decline in the price of farm products because the demand for farm products is income elastic. D. a large decline in the price of farm products because the demand for farm products is price elastic. 15.) Over time, technological change has: A. reduced both the price elasticity and income elasticity of the demand for farm products. B. reduced the minimum efficient scale of production in agriculture and increased the prices of farm products. C. increased both price elasticity and income elasticity of the demand for farm products. D. increased the minimum efficient scale of production in agriculture and reduced the prices of farm products. 16.) Productivity increases in agriculture have: A. increased the demand for foodstuffs. B. been negligible since the Second World War. C. increased the incomes of farm households above the national average. D. lowered farm prices. 17.) One consequence of the long-run problem faced by farms has been a: A. rapid increase in the price of farm output. B. massive exit of workers from agriculture to other sectors of the economy. C. smaller average farm size. D. reduction in U.S. exports of farm products. 18.) Which of the following is correct? A. The rapid expansion of foreign incomes will reduce U.S. agricultural exports. B. A decrease in the international value of the dollar will reduce U.S. agricultural exports. C. An increase in the international value of the dollar will reduce U.S. agricultural exports. D. Changes in the international value of the dollar have no effect on U.S. agricultural exports. 19.) Domestic price supports on, say, sugar: A. generate trade barriers to reduce imports of foreign sugar. B. increase world sugar prices. C. keep the domestic price of sugar artificially low. D. increase the earnings of foreign sugar producers. 20.) Price supports: A. decrease pollution because participants must practice organic farming. B. neither increase nor decrease environmental pollution. C. increase pollution because supports encourage the cultivation of marginal land and the use of more pesticides and fertilizers. D. discourage rent-seeking activity.