Problem 1
True or false: Under the "rule of reason" that was established by the Supreme Court in the U.S. Steel case, a monopoly seller should be found guilty of violating antitrust laws even if it is charging low prices to consumers and acting the same way a competitive firm would act. \(L O 21.2\)
Problem 2
How would you expect antitrust authorities to react to: \(L O 21.2\) a. A proposed merger of Ford and General Motors. b. Evidence of secret meetings by contractors to rig bids for highway construction projects. c. A proposed merger of a large shoe manufacturer and a chain of retail shoe stores. d. A proposed merger of a small life-insurance company and a regional candy manufacturer. e. An automobile rental firm that charges higher rates for last minute rentals than for rentals reserved weeks in advance.
Problem 3
When confronted with a natural monopoly that restricts output and charges monopoly prices, the two methods that governments have for promoting better outcomes are: LO21.3 a. Public ownership and public regulation. b. Sole proprietorships and public goods. c. Antitrust law and horizontal mergers. d. Creative destruction and laissez-faire.
Problem 4
Which of the following is the correct name for the idea that certain firms prefer government regulation because regulation shields them from the pressures of competition and, in effect, guarantees them a regulated profit. \(L O 21.3\) a. The public interest theory of regulation. b. The structuralists' theory of monopoly. c. The legal cartel theory of regulation. d. The public regulation theory of natural monopoly.
Problem 5
True or false: Economists believe that social regulation is an exception to the \(\mathrm{MB}=\mathrm{MC}\) rule because social regulation should in every case extend as far as possible in order to ensure safe products, less pollution, and improved working conditions. LO21.4
