Question 1

The Sherman Antitrust Act makes it unlawful for firms to collude to restrain trade.

Accepted Answer

A) True 
 B)False

Question 2

Exhibit 15-4   If regulators allow the natural monopolist in Exhibit 15-4 to earn only a normal profit, it will produce an output equal to

Accepted Answer

A) 0 
B) g 
C) h 
D) i 
E) j 
A) 0 
B) g 
C) h 
D) i 
E) j

Question 3

Airlines are __________ than they were before deregulation.

Accepted Answer

A) more dangerous 
B) more concentrated 
C) higher priced 
D) flying fewer miles 
E) much more profitable 
A) more dangerous 
B) more concentrated 
C) higher priced 
D) flying fewer miles 
E) much more profitable

Question 4

According to the U.S.Supreme Court's 1945 ruling on Alcoa,

Accepted Answer

A) all monopolies are illegal 
B) price fixing agreements are illegal under the rule of reason 
C) small firms can be found to be in violation of the Sherman Antitrust Act 
D) "mere size is no offense." 
E) possession of market power is sufficient for a firm to be found in violation of the Sherman Antitrust Act 
A) all monopolies are illegal 
B) price fixing agreements are illegal under the rule of reason 
C) small firms can be found to be in violation of the Sherman Antitrust Act 
D) "mere size is no offense." 
E) possession of market power is sufficient for a firm to be found in violation of the Sherman Antitrust Act

Question 5

Exhibit 15-5   Consider the natural monopoly depicted in exhibit 15-5.If regulators set the price so the natural monopolist to at least break-even, how much output will the monopolist produce?

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 6

To calculate the Herfindahl index,

Accepted Answer

A) add the market shares of all firms in an industry 
B) add the market shares of any four firms in an industry and then square them 
C) add the market shares of the four largest firms in an industry 
D) square the market shares of all firms in an industry and then add them 
E) square the market shares of the four largest firms in an industry and then add them 
A) add the market shares of all firms in an industry 
B) add the market shares of any four firms in an industry and then square them 
C) add the market shares of the four largest firms in an industry 
D) square the market shares of all firms in an industry and then add them 
E) square the market shares of the four largest firms in an industry and then add them

Question 7

If producers support proposed regulation of their industry, then

Accepted Answer

A) it is likely that consumers will benefit from the regulation 
B) it is likely that producers are looking out for the interests of the consumers 
C) it is likely that both producers and consumers will be adversely affected by the legislation 
D) it is possible that consumers will be adversely affected by the legislation 
E) it is likely that prices will fall 
A) it is likely that consumers will benefit from the regulation 
B) it is likely that producers are looking out for the interests of the consumers 
C) it is likely that both producers and consumers will be adversely affected by the legislation 
D) it is possible that consumers will be adversely affected by the legislation 
E) it is likely that prices will fall

Question 8

An example of exclusive dealing occurs when

Accepted Answer

A) one individual serves on more than one board of directors 
B) one individual serves on only one board of directors 
C) a producer sells spark plugs to a car manufacturer with the understanding that the manufacturer will buy spark plugs only from that producer 
D) the seller offers a good for sale to an individual (or a limited group)on substantially better terms than is available to the general public 
E) a producer of spark plugs requires that customers also purchase rotors when they buy spark plugs 
A) one individual serves on more than one board of directors 
B) one individual serves on only one board of directors 
C) a producer sells spark plugs to a car manufacturer with the understanding that the manufacturer will buy spark plugs only from that producer 
D) the seller offers a good for sale to an individual (or a limited group)on substantially better terms than is available to the general public 
E) a producer of spark plugs requires that customers also purchase rotors when they buy spark plugs

Question 9

If two large firms from different industries merge,

Accepted Answer

A) industry concentration rises 
B) industry concentration falls 
C) the total assets of the top 200 firms in the country will stay the same 
D) industry concentration rises in one market and falls in the other 
E) industry concentration is not affected 
A) industry concentration rises 
B) industry concentration falls 
C) the total assets of the top 200 firms in the country will stay the same 
D) industry concentration rises in one market and falls in the other 
E) industry concentration is not affected

Question 10

The 100 largest U.S.firms currently control

Accepted Answer

A) about half of all manufacturing assets in the United States, which represents a decrease since World War II 
B) about half of all manufacturing assets in the United States, which represents an increase since World War II 
C) about half of all manufacturing assets in the United States, which represents no change since World War II 
D) about 40 percent of all manufacturing assets in the United States, which represents a decrease since World War II 
E) about 40 percent of all manufacturing assets in the United States, which represents an increase since World War II 
A) about half of all manufacturing assets in the United States, which represents a decrease since World War II 
B) about half of all manufacturing assets in the United States, which represents an increase since World War II 
C) about half of all manufacturing assets in the United States, which represents no change since World War II 
D) about 40 percent of all manufacturing assets in the United States, which represents a decrease since World War II 
E) about 40 percent of all manufacturing assets in the United States, which represents an increase since World War II

Question 11

In order to ensure allocative efficiency on the part of a natural monopoly, regulators would set price equal to marginal cost.

Accepted Answer

A) True 
 B)False

Question 12

According to William Shepherd's examination of competitive trends in the U.S.economy, a market is effectively competitive if

Accepted Answer

A) the top four firms supply more than 60 percent of the market, have stable market shares, and cooperate with each other 
B) the top four firms supply more than 60 percent of the market, have stable market shares, and compete with each other 
C) the industry exhibits low concentration, few barriers to entry, and little or no collusion 
D) the industry exhibits low concentration and little or no collusion, despite significant barriers to entry 
E) the dominant firm has two close rivals 
A) the top four firms supply more than 60 percent of the market, have stable market shares, and cooperate with each other 
B) the top four firms supply more than 60 percent of the market, have stable market shares, and compete with each other 
C) the industry exhibits low concentration, few barriers to entry, and little or no collusion 
D) the industry exhibits low concentration and little or no collusion, despite significant barriers to entry 
E) the dominant firm has two close rivals

Question 13

Economies of scale throughout the range of market demand give natural monopolies

Accepted Answer

A) downward-sloping long-run average cost curves 
B) upward-sloping long-run average total cost curves 
C) upward-sloping long-run average cost curves 
D) upward-sloping short-run average total cost curves 
E) horizontal long-run average cost curves 
A) downward-sloping long-run average cost curves 
B) upward-sloping long-run average total cost curves 
C) upward-sloping long-run average cost curves 
D) upward-sloping short-run average total cost curves 
E) horizontal long-run average cost curves

Question 14

If a firm can double inputs and, thereby, more than double output over the range of output the market demands, it is said to be experiencing

Accepted Answer

A) decreasing minimum efficient scale 
B) increasing returns to scale 
C) constant returns to scale 
D) decreasing returns to scale 
E) increasing long run average cost 
A) decreasing minimum efficient scale 
B) increasing returns to scale 
C) constant returns to scale 
D) decreasing returns to scale 
E) increasing long run average cost

Question 15

The index that the U.S.government currently uses to determine whether a merger should be allowed is the

Accepted Answer

A) Herfindahl index 
B) Schumpeter index 
C) Dow Jones average index 
D) consumer price index 
E) four-firm concentration ratio 
A) Herfindahl index 
B) Schumpeter index 
C) Dow Jones average index 
D) consumer price index 
E) four-firm concentration ratio

Question 16

If a regulator sets the price equal to the natural monopolist's marginal cost,

Accepted Answer

A) the monopoly will experience a loss 
B) the monopoly will earn a profit 
C) the monopoly will earn zero profit 
D) consumers will be worse off than they would be if the firm's profit maximization activities were unregulated 
E) the monopoly will be better off than it would be if its profit maximization activities were unregulated 
A) the monopoly will experience a loss 
B) the monopoly will earn a profit 
C) the monopoly will earn zero profit 
D) consumers will be worse off than they would be if the firm's profit maximization activities were unregulated 
E) the monopoly will be better off than it would be if its profit maximization activities were unregulated

Question 17

A natural monopoly, such as the local telephone company, is characterized by

Accepted Answer

A) a lack of natural competitors 
B) low fixed costs and diseconomies of scale 
C) economies of scale 
D) a lack of government regulation 
E) constant costs of production 
A) a lack of natural competitors 
B) low fixed costs and diseconomies of scale 
C) economies of scale 
D) a lack of government regulation 
E) constant costs of production

Question 18

Which act of Congress declared tying contracts, exclusive dealing, and price discrimination illegal?

Accepted Answer

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

Question 19

Exhibit 15-5   Consider the natural monopoly depicted in exhibit 15-5.If regulators set the price so as to achieve the socially efficient level of output, how much profit will the monopolist earn?

Accepted Answer

A) no profit, the firm will lose about $28 
B) no profit, the firm will lose about $12 
C) no profit, the firm will roughly break-even 
D) $12 of profit 
E) $28 of profit 
A) no profit, the firm will lose about $28 
B) no profit, the firm will lose about $12 
C) no profit, the firm will roughly break-even 
D) $12 of profit 
E) $28 of profit

Question 20

As concentration in an industry increases, the value of the Herfindahl index falls.

Accepted Answer

A) True 
 B)False

Exam 15: Economic Regulation and Antitrust Policy

The Sherman Antitrust Act makes it unlawful for firms to collude to restrain trade.

Exhibit 15-4 If regulators allow the natural monopolist in Exhibit 15-4 to earn only a normal profit, it will produce an output equal to

Airlines are __________ than they were before deregulation.

According to the U.S.Supreme Court's 1945 ruling on Alcoa,

Exhibit 15-5 Consider the natural monopoly depicted in exhibit 15-5.If regulators set the price so the natural monopolist to at least break-even, how much output will the monopolist produce?

To calculate the Herfindahl index,

If producers support proposed regulation of their industry, then

An example of exclusive dealing occurs when

If two large firms from different industries merge,

The 100 largest U.S.firms currently control

In order to ensure allocative efficiency on the part of a natural monopoly, regulators would set price equal to marginal cost.

According to William Shepherd's examination of competitive trends in the U.S.economy, a market is effectively competitive if

Economies of scale throughout the range of market demand give natural monopolies

If a firm can double inputs and, thereby, more than double output over the range of output the market demands, it is said to be experiencing

The index that the U.S.government currently uses to determine whether a merger should be allowed is the

If a regulator sets the price equal to the natural monopolist's marginal cost,

A natural monopoly, such as the local telephone company, is characterized by

Which act of Congress declared tying contracts, exclusive dealing, and price discrimination illegal?

Exhibit 15-5 Consider the natural monopoly depicted in exhibit 15-5.If regulators set the price so as to achieve the socially efficient level of output, how much profit will the monopolist earn?

As concentration in an industry increases, the value of the Herfindahl index falls.

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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