Question 1

The natural monopolist might have an incentive to decrease cost under

Accepted Answer

A)  price regulation. 
B)  profit regulation. 
C)  output regulation. 
D)  a and b 
A)  price regulation. 
B)  profit regulation. 
C)  output regulation. 
D)  a and b

Question 2

Evidence pertaining to the airline industry suggests that

Accepted Answer

A)  since the airlines have become deregulated, airline fares have increased steadily. 
B)  under regulation the airlines' fares were low, which indicates that the regulators were doing a good job setting prices. 
C)  airline fares are no higher and no lower than they were when the industry was regulated. 
D)  deregulation of the airline industry has brought significant price reductions. 
A)  since the airlines have become deregulated, airline fares have increased steadily. 
B)  under regulation the airlines' fares were low, which indicates that the regulators were doing a good job setting prices. 
C)  airline fares are no higher and no lower than they were when the industry was regulated. 
D)  deregulation of the airline industry has brought significant price reductions.

Question 3

Price discrimination was deemed illegal by the

Accepted Answer

A)  Sherman Act. 
B)  Wheeler-Lea Act. 
C)  Clayton Act. 
D)  Federal Trade Commission Act. 
E)  none of the above 
A)  Sherman Act. 
B)  Wheeler-Lea Act. 
C)  Clayton Act. 
D)  Federal Trade Commission Act. 
E)  none of the above

Question 4

Which of the following statements is true?

Accepted Answer

A)  The more broadly a market is defined, the less likely a firm will be considered a monopoly. 
B)  The Celler-Kefauver Antimerger Act was designed to close the merger loophole that existed in the Clayton Act. 
C)  The Sherman Act declared illegal acts that constitute restraint of trade. 
D)  a and b 
E)  a, b, and c 
A)  The more broadly a market is defined, the less likely a firm will be considered a monopoly. 
B)  The Celler-Kefauver Antimerger Act was designed to close the merger loophole that existed in the Clayton Act. 
C)  The Sherman Act declared illegal acts that constitute restraint of trade. 
D)  a and b 
E)  a, b, and c

Question 5

The antitrust legislation that declares illegal "unfair methods of competition in commerce" is

Accepted Answer

A)  the Sherman Act. 
B)  the Clayton Act. 
C)  the Federal Trade Commission Act. 
D)  the Robinson-Patman Act. 
A)  the Sherman Act. 
B)  the Clayton Act. 
C)  the Federal Trade Commission Act. 
D)  the Robinson-Patman Act.

Question 6

Regulatory lag refers to

Accepted Answer

A)  the fact that most regulated firms are slow to change their structures of production. 
B)  the fact that most regulated firms are slow to respond to their customers' preferences. 
C)  the time period between when a natural monopoly's costs change and when the regulatory agency adjusts prices for the natural monopoly. 
D)  the time period between when natural monopoly begins to produce its output and when it sells its product. 
E)  none of the above 
A)  the fact that most regulated firms are slow to change their structures of production. 
B)  the fact that most regulated firms are slow to respond to their customers' preferences. 
C)  the time period between when a natural monopoly's costs change and when the regulatory agency adjusts prices for the natural monopoly. 
D)  the time period between when natural monopoly begins to produce its output and when it sells its product. 
E)  none of the above

Question 7

The Clayton Act of 1914 makes price discrimination,exclusive dealers,tying contracts,and the acquisition of competing companies' stock illegal when their effects "substantially lessen competition or tend to create a monopoly."

Accepted Answer

A) True 
 B)False

Question 8

An "interlocking directorate" is

Accepted Answer

A)  an arrangement whereby the leaders of a union are also in the top management of the business with which the union is dealing. 
B)  selling to a retailer on the condition that the retailer not carry any rival products. 
C)  an arrangement whereby the sale of one product is dependent on the purchase of some other product. 
D)  an arrangement whereby the directors of one company sit on the board of directors of another company in the same industry. 
A)  an arrangement whereby the leaders of a union are also in the top management of the business with which the union is dealing. 
B)  selling to a retailer on the condition that the retailer not carry any rival products. 
C)  an arrangement whereby the sale of one product is dependent on the purchase of some other product. 
D)  an arrangement whereby the directors of one company sit on the board of directors of another company in the same industry.

Question 9

"Tying contracts" are

Accepted Answer

A)  agreements between unions and businesses such that when a labor contract is signed, the union and the firm are bound by its terms. 
B)  selling to a retailer on the condition that the retailer not resell the product to another business. 
C)  selling to a retailer on the condition that the retailer not carry any rival products. 
D)  arrangements whereby the sale of one product is dependent on the purchase of some other product. 
A)  agreements between unions and businesses such that when a labor contract is signed, the union and the firm are bound by its terms. 
B)  selling to a retailer on the condition that the retailer not resell the product to another business. 
C)  selling to a retailer on the condition that the retailer not carry any rival products. 
D)  arrangements whereby the sale of one product is dependent on the purchase of some other product.

Question 10

If company A and B combine under single ownership of control,this would be a __________ merger.

Accepted Answer

A)  horizontal 
B)  vertical 
C)  conglomerate 
D)  Herfindahl 
E)  There is not enough information to answer the question. 
A)  horizontal 
B)  vertical 
C)  conglomerate 
D)  Herfindahl 
E)  There is not enough information to answer the question.

Question 11

The type of regulatory pricing (of a natural monopoly firm)that is consistent with resource-allocative efficiency is __________ cost pricing.

Accepted Answer

A)  average 
B)  sunk 
C)  marginal 
D)  fixed 
E)  none of the above 
A)  average 
B)  sunk 
C)  marginal 
D)  fixed 
E)  none of the above

Question 12

The natural monopolist might have an incentive to let costs increase under

Accepted Answer

A)  price regulation. 
B)  profit regulation. 
C)  output regulation. 
D)  a and b 
A)  price regulation. 
B)  profit regulation. 
C)  output regulation. 
D)  a and b

Question 13

Exhibit 26-3
  
-Refer to Exhibit 26-3.The four-firm concentration ratio for this industry is

Accepted Answer

A)  46 percent. 
B)  49 percent. 
C)  54 percent. 
D)  696 percent. 
E)  This cannot be determined without further information. 
A)  46 percent. 
B)  49 percent. 
C)  54 percent. 
D)  696 percent. 
E)  This cannot be determined without further information.

Question 14

The Herfindahl index measures the

Accepted Answer

A)  degree of concentration in an industry. 
B)  size of a market in terms of total dollar sales. 
C)  degree to which average variable cost is higher than average fixed cost at every level of output. 
D)  the amount of deceptive and false advertising in an industry. 
E)  none of the above 
A)  degree of concentration in an industry. 
B)  size of a market in terms of total dollar sales. 
C)  degree to which average variable cost is higher than average fixed cost at every level of output. 
D)  the amount of deceptive and false advertising in an industry. 
E)  none of the above

Question 15

The Justice Department began using the Herfindahl index (rather than the four- and eight-firm concentration ratios)in 1982.

Accepted Answer

A) True 
 B)False

Question 16

The market shares (in percentage terms)for the 12 firms that comprise an industry are 15,12,11,10,8,7,7,6,6,6,6,and 6.The Herfindahl index will rise by __________ points if the firms with the two largest market shares merge.

Accepted Answer

A)  400 
B)  360 
C)  100 
D)  220 
E)  140 
A)  400 
B)  360 
C)  100 
D)  220 
E)  140

Question 17

The merger of a brewery with an aluminum can producer is an example of a __________ merger.

Accepted Answer

A)  horizontal 
B)  vertical 
C)  conglomerate 
D)  parallel 
A)  horizontal 
B)  vertical 
C)  conglomerate 
D)  parallel

Question 18

Empirical research has shown that immediately upon deregulation of the airline industry,

Accepted Answer

A)  airlines spent less time and money on aircraft maintenance. 
B)  airline safety decreased. 
C)  airline fares decreased. 
D)  all of the above 
A)  airlines spent less time and money on aircraft maintenance. 
B)  airline safety decreased. 
C)  airline fares decreased. 
D)  all of the above

Question 19

If the four-firm concentration ratio is 100 percent,this means that the

Accepted Answer

A)  top four firms each hold 5 percent of the market share. 
B)  industry consists of no more than four firms. 
C)  top four firms necessarily each hold a 25 percent market share. 
D)  none of the above 
A)  top four firms each hold 5 percent of the market share. 
B)  industry consists of no more than four firms. 
C)  top four firms necessarily each hold a 25 percent market share. 
D)  none of the above

Question 20

A firm defending itself in an antitrust suit would prefer the market it operates in to be defined _____________,which ______________ the firm's market share compared to what it might be judged otherwise.

Accepted Answer

A)  narrowly; raises 
B)  narrowly; lowers 
C)  broadly; raises 
D)  broadly; lowers 
A)  narrowly; raises 
B)  narrowly; lowers 
C)  broadly; raises 
D)  broadly; lowers

Exam 26: Government and Product Markets: Antitrust and Regulation

The natural monopolist might have an incentive to decrease cost under

Evidence pertaining to the airline industry suggests that

Price discrimination was deemed illegal by the

Which of the following statements is true?

The antitrust legislation that declares illegal "unfair methods of competition in commerce" is

Regulatory lag refers to

The Clayton Act of 1914 makes price discrimination,exclusive dealers,tying contracts,and the acquisition of competing companies' stock illegal when their effects "substantially lessen competition or tend to create a monopoly."

An "interlocking directorate" is

"Tying contracts" are

If company A and B combine under single ownership of control,this would be a __________ merger.

The type of regulatory pricing (of a natural monopoly firm)that is consistent with resource-allocative efficiency is __________ cost pricing.

The natural monopolist might have an incentive to let costs increase under

Exhibit 26-3 -Refer to Exhibit 26-3.The four-firm concentration ratio for this industry is

The Herfindahl index measures the

The Justice Department began using the Herfindahl index (rather than the four- and eight-firm concentration ratios)in 1982.

The market shares (in percentage terms)for the 12 firms that comprise an industry are 15,12,11,10,8,7,7,6,6,6,6,and 6.The Herfindahl index will rise by __________ points if the firms with the two largest market shares merge.

The merger of a brewery with an aluminum can producer is an example of a __________ merger.

Empirical research has shown that immediately upon deregulation of the airline industry,

If the four-firm concentration ratio is 100 percent,this means that the

A firm defending itself in an antitrust suit would prefer the market it operates in to be defined _____________,which ______________ the firm's market share compared to what it might be judged otherwise.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

A firm defending itself in an antitrust suit would prefer the market it operates in to be defined _,which __ the firm's market share compared to what it might be judged otherwise.