Question 1

Exhibit 15-5   The natural monopoly depicted in exhibit 15-5, if unregulated would produce how much output?

Accepted Answer

A) 2 units 
B) 3 units 
C) 4 units 
D) 5 units 
E) 6 units 
A) 2 units 
B) 3 units 
C) 4 units 
D) 5 units 
E) 6 units

Question 2

The Sherman Antitrust Act of 1890

Accepted Answer

A) immediately reduced the number of trusts and the incidence of anticompetitive behavior 
B) established the Antitrust Division of the Department of Justice 
C) did not apply to farmers 
D) was not fully enforced at first 
E) prohibited price discrimination 
A) immediately reduced the number of trusts and the incidence of anticompetitive behavior 
B) established the Antitrust Division of the Department of Justice 
C) did not apply to farmers 
D) was not fully enforced at first 
E) prohibited price discrimination

Question 3

Under the rule of reason, a U.S.firm with an 80 percent market share

Accepted Answer

A) will always be found in violation of the Sherman Antitrust Act 
B) will never be found in violation of the Sherman Antitrust Act 
C) may be found in violation of the Sherman Antitrust Act, depending on the firm's conduct 
D) will always be found in violation of the Sherman Antitrust Act if there is only one other firm in the industry 
E) will be found in violation of the Sherman Antitrust Act only if there is only one other firm in the industry 
A) will always be found in violation of the Sherman Antitrust Act 
B) will never be found in violation of the Sherman Antitrust Act 
C) may be found in violation of the Sherman Antitrust Act, depending on the firm's conduct 
D) will always be found in violation of the Sherman Antitrust Act if there is only one other firm in the industry 
E) will be found in violation of the Sherman Antitrust Act only if there is only one other firm in the industry

Question 4

Exhibit 15-5   Consider the natural monopoly depicted in exhibit 15-5.What is the socially efficient level of output?

Accepted Answer

A) 4 units 
B) 5 units 
C) 6 units 
D) 7 units 
E) 8 units 
A) 4 units 
B) 5 units 
C) 6 units 
D) 7 units 
E) 8 units

Question 5

Which act of Congress extended the government's authority to block horizontal and vertical mergers?

Accepted Answer

A) the Clayton Act 
B) the Sherman Antitrust Act 
C) the Wheeler-Lea Act 
D) the Celler-Kefauver Anti-Merger Act 
E) the Herfindahl-Hirschmann Act 
A) the Clayton Act 
B) the Sherman Antitrust Act 
C) the Wheeler-Lea Act 
D) the Celler-Kefauver Anti-Merger Act 
E) the Herfindahl-Hirschmann Act

Question 6

The research of William Shepherd suggests that since World War II, the three main reasons for increased competition in U.S.industries are international trade, deregulation, and antitrust activity.

Accepted Answer

A) True 
 B)False

Question 7

The Justice Department generally challenges any merger that meets the following two conditions: (1)the post-merger HHI exceeds 1, 800 and (2)the merger increases the index by more than 100 points.

Accepted Answer

A) True 
 B)False

Question 8

If it is employing the rule of reason when considering an antitrust case, the court

Accepted Answer

A) considers why the offending practice was adopted and its effect on competition 
B) does not consider why the offending practice was adopted or its effect on competition 
C) ignores the economic rationale for the offending practice and its consequences 
D) needs only determine that the offending practice took place 
E) considers only whether the firm has market power, not whether it used that power unreasonably 
A) considers why the offending practice was adopted and its effect on competition 
B) does not consider why the offending practice was adopted or its effect on competition 
C) ignores the economic rationale for the offending practice and its consequences 
D) needs only determine that the offending practice took place 
E) considers only whether the firm has market power, not whether it used that power unreasonably

Question 9

Exhibit 15-2   In Exhibit 15-2, the consumer surplus that results from an unregulated monopoly, is shown by area

Accepted Answer

A) abc 
B) adf 
C) cef 
D) dfeg 
E) bcfd 
A) abc 
B) adf 
C) cef 
D) dfeg 
E) bcfd

Question 10

Public utilities are either government-owned or government-regulated firms.

Accepted Answer

A) True 
 B)False

Question 11

The rail system in Metropolis is a natural monopoly.If the government regulates the system by setting the fare equal to marginal cost, which of the following will be true?

Accepted Answer

A) Profit will be zero under regulation. 
B) Only normal profit will be earned under regulation. 
C) Accounting profit will be zero under regulation. 
D) Economic loss will occur under regulation. 
E) Profit will be higher than if the monopoly were unregulated. 
A) Profit will be zero under regulation. 
B) Only normal profit will be earned under regulation. 
C) Accounting profit will be zero under regulation. 
D) Economic loss will occur under regulation. 
E) Profit will be higher than if the monopoly were unregulated.

Question 12

Exhibit 15-2   In Exhibit 15-2, the consumer surplus that results from a regulated monopoly that charges a price equal to MC, is shown by area

Accepted Answer

A) abc 
B) adf 
C) cef 
D) dfeg 
E) bcfd 
A) abc 
B) adf 
C) cef 
D) dfeg 
E) bcfd

Question 13

If the value of the Herfindahl index is 10, 000, there must be exactly one firm in the industry.

Accepted Answer

A) True 
 B)False

Question 14

In its case against Microsoft, the government contended that Microsoft

Accepted Answer

A) was engaging in exclusive dealing 
B) was integrating its browser into Windows 98 as a way of boosting the browser's market share 
C) was integrating its browser into Windows 98 as a form of predatory pricing 
D) had attempted to engineer a vertical merger 
E) was using tying contracts 
A) was engaging in exclusive dealing 
B) was integrating its browser into Windows 98 as a way of boosting the browser's market share 
C) was integrating its browser into Windows 98 as a form of predatory pricing 
D) had attempted to engineer a vertical merger 
E) was using tying contracts

Question 15

Which of the following is not a criticism of monopolies?

Accepted Answer

A) They restrict output. 
B) They set price above the perfectly competitive level. 
C) They tend to be less innovative than firms in a competitive market. 
D) They exert a disproportionate amount of political influence. 
E) They reduce allocative efficiency through perfect price discrimination. 
A) They restrict output. 
B) They set price above the perfectly competitive level. 
C) They tend to be less innovative than firms in a competitive market. 
D) They exert a disproportionate amount of political influence. 
E) They reduce allocative efficiency through perfect price discrimination.

Question 16

According to Shepherd, the percentage of industries that were effectively competitive in 1988 is approximately

Accepted Answer

A) 25 percent 
B) 50 percent 
C) 64 percent 
D) 77 percent 
E) 89 percent 
A) 25 percent 
B) 50 percent 
C) 64 percent 
D) 77 percent 
E) 89 percent

Question 17

Natural monopolies are firms that

Accepted Answer

A) have a downward-sloping long-run average cost curve over the entire range of market demand 
B) have an upward-sloping long-run average cost curve over the entire range of market demand 
C) are protected against the entry of new firms by patents, licenses, or other legal restrictions 
D) control a nonreproducible resource that is critical to production 
E) have been created over time by the mergers of many smaller firms 
A) have a downward-sloping long-run average cost curve over the entire range of market demand 
B) have an upward-sloping long-run average cost curve over the entire range of market demand 
C) are protected against the entry of new firms by patents, licenses, or other legal restrictions 
D) control a nonreproducible resource that is critical to production 
E) have been created over time by the mergers of many smaller firms

Question 18

According to William Shepherd's examination of competitive trends in the U.S.economy, a tight oligopoly

Accepted Answer

A) is a single firm that controls the entire market and can block entry 
B) is an industry in which the top four firms supply more than 60 percent of the market, have stable market shares, and cooperate with each other 
C) is an industry in which the top four firms supply more than 60 percent of the market, have unstable market shares, and do not cooperate with each other 
D) is an industry in which a single firm has over half the market share and no close rival 
E) is an industry in which a single firm has over one-third of the entire market, the market share is stable, and the firm cooperates with other firms in the industry 
A) is a single firm that controls the entire market and can block entry 
B) is an industry in which the top four firms supply more than 60 percent of the market, have stable market shares, and cooperate with each other 
C) is an industry in which the top four firms supply more than 60 percent of the market, have unstable market shares, and do not cooperate with each other 
D) is an industry in which a single firm has over half the market share and no close rival 
E) is an industry in which a single firm has over one-third of the entire market, the market share is stable, and the firm cooperates with other firms in the industry

Question 19

Because of the rise of global competition and free trade,

Accepted Answer

A) antitrust policy serves no purpose 
B) antitrust policy may be less necessary than previously thought 
C) U.S.industrial concentration poses more of a threat to consumers 
D) U.S.markets are becoming less contestable 
E) U.S.manufacturers are seeking fewer trade barriers 
A) antitrust policy serves no purpose 
B) antitrust policy may be less necessary than previously thought 
C) U.S.industrial concentration poses more of a threat to consumers 
D) U.S.markets are becoming less contestable 
E) U.S.manufacturers are seeking fewer trade barriers

Question 20

The first federal antitrust law enacted in the United States was:

Accepted Answer

A) The Clayton Act 
B) Thr Sherman Antitrust Act 
C) The Robinson Patman Act 
D) The Federal Trade Commission Act 
E) The Herfindahl-Hirschman Act 
A) The Clayton Act 
B) Thr Sherman Antitrust Act 
C) The Robinson Patman Act 
D) The Federal Trade Commission Act 
E) The Herfindahl-Hirschman Act

Exam 15: Economic Regulation and Antitrust Policy

Exhibit 15-5 The natural monopoly depicted in exhibit 15-5, if unregulated would produce how much output?

The Sherman Antitrust Act of 1890

Under the rule of reason, a U.S.firm with an 80 percent market share

Exhibit 15-5 Consider the natural monopoly depicted in exhibit 15-5.What is the socially efficient level of output?

Which act of Congress extended the government's authority to block horizontal and vertical mergers?

The research of William Shepherd suggests that since World War II, the three main reasons for increased competition in U.S.industries are international trade, deregulation, and antitrust activity.

The Justice Department generally challenges any merger that meets the following two conditions: (1)the post-merger HHI exceeds 1, 800 and (2)the merger increases the index by more than 100 points.

If it is employing the rule of reason when considering an antitrust case, the court

Exhibit 15-2 In Exhibit 15-2, the consumer surplus that results from an unregulated monopoly, is shown by area

Public utilities are either government-owned or government-regulated firms.

The rail system in Metropolis is a natural monopoly.If the government regulates the system by setting the fare equal to marginal cost, which of the following will be true?

Exhibit 15-2 In Exhibit 15-2, the consumer surplus that results from a regulated monopoly that charges a price equal to MC, is shown by area

If the value of the Herfindahl index is 10, 000, there must be exactly one firm in the industry.

In its case against Microsoft, the government contended that Microsoft

Which of the following is not a criticism of monopolies?

According to Shepherd, the percentage of industries that were effectively competitive in 1988 is approximately

Natural monopolies are firms that

According to William Shepherd's examination of competitive trends in the U.S.economy, a tight oligopoly

Because of the rise of global competition and free trade,

The first federal antitrust law enacted in the United States was:

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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