Chapter 32 Key Terms McConnell and Brue 14th Edition
antitrust policy
The use of the antitrust laws to promote competition and economic efficiency.
industrial regulation
The older and more traditional type of regulation in which government is concerned with the prices charged and the services provided the public in specific industries: in contrast to social regulation.
social regulation
The regulation by which government is concerned with the conditions under which goods and services are produced their physical characteristics and the impact of their production on society; in contrast to industrial regulation.
industrial policy
Any policy by which government takes a direct and active role in promoting specific firms or industries for purposes of expanding their output and achieving economic growth; called “technology policy” when its goal is to promote technological advance.
industrial concentration
A situation in which a single firm or a small number of firms produces the major portion of an industry’s output; fewness of producers within industries.
interindustry competition
The competition for sales between the products of one industry and the products of another industry.
foreign competition
(See Import competition.)
potential competition
New competitors which may be induced to enter an industry if firms now in that industry are receiving large economic profits.
Sherman Act
The Federal antitrust act of 1890 which made monopoly and conspiracies to restrain trade criminal offenses.
Clayton Act
The Federal antitrust act of 1914 which strengthened the Sherman Act by making it illegal for firms to engage in certain specified practices.
tying contracts
A promise made by a buyer when allowed to purchase a product from a seller that it will purchase certain other products from the same seller; a practice forbidden by the Clayton Act.
interlocking directorates
A situation in which one or more members of the board of directors of a corporation are also on the board of directors of a competing corporation; illegal under the Clayton Act.
Federal Trade Commission Act
The Federal act of 1914 which established the Federal Trade Commission.
cease-and-desist order
An order from a court or government agency to a corporation or individual to stop engaging in a specified practice.
Wheeler-Lea Act
The Federal act of 1938 which amended the Federal Trade Commission Act by prohibiting and giving the commission power to investigate unfair and deceptive acts or practices of commerce (such as false and misleading advertising and the misrepresentation of products).
Celler-Kefauver Act
The Federal act of 1950 that amended the Clayton Act by prohibiting the acquisition of the assets of one firm by another firm when the effect would be to lessen competition.
U.S. Steel case
The antitrust action brought by the Federal government against the U.S. Steel Corporation in which the courts ruled (in 1920) that only unreasonable restraints of trade were illegal and that size and the possession of monopoly power were not violations of the antitrust laws.
rule of reason
The rule stated and applied in the U.S. Steel case that only combinations and contracts unreasonably restraining trade are subject to actions under the antitrust laws and that size and possession of monopoly power are not themselves illegal.
Alcoa case
A 1945 case in which the courts ruled that the possession of monopoly power no matter how reasonably that power had been used was a violation of the antitrust laws; temporarily overturned the rule of reason applied in the U.S. Steel case.
DuPont cellophane case
The antitrust case brought against DuPont in which the U.S. Supreme Court ruled (in 1956) that while DuPont had a monopoly in the narrowly defined market for cellophane it did not monopolize the more broadly defined market for flexible packaging materials. It was thus not guilty of violating the Sherman Act.
horizontal merger
The merger into a single firm of two firms producing the same product and selling it in the same geographical market.
vertical merger
The merger of one or more firms engaged in different stages of the production of a final product.
conglomerate merger
The merger of a firm in one industry with a firm in another industry or region (with a firm which is not a supplier customer or competitor).
per se violations
Collusive actions such as attempts by firms to fix prices or divide a market which are violations
of the antitrust laws even if the actions are unsuccessful.
natural monopoly
An industry in which economies of scale are so great the product can be produced by one firm at a lower average total cost than if the product were produced by more than one firm.
public interest theory of regulation
The presumption that the purpose of the regulation of an industry is to protect the public (consumers) from abuse of the power possessed by natural monopolies.
legal cartel theory of regulation
The hypothesis that some industries seek regulation or want to maintain regulation so they may form or maintain a legal cartel.