Question 1

The Sherman Act of 1890 was passed with the intent of

Accepted Answer

A)  establishing the Federal Trade Commission (FT
C)  to deal with "unfair methods of competition." 
B)  preventing monopolization and/or conspiracy in the restraint of trade. 
C)  spelling out the conditions under which mergers would be considered anti-competitive. 
D)  dealing with false and deceptive advertising. 
E)  declaring interlocking directorates illegal. 
A)  establishing the Federal Trade Commission (FT
C)  to deal with "unfair methods of competition." 
B)  preventing monopolization and/or conspiracy in the restraint of trade. 
C)  spelling out the conditions under which mergers would be considered anti-competitive. 
D)  dealing with false and deceptive advertising. 
E)  declaring interlocking directorates illegal.

Question 2

The advantage of the Herfindahl index over the four- and eight-firm concentration ratios is that it provides information

Accepted Answer

A)  on the degree to which foreign firms impact domestic competition. 
B)  about the dispersion of firm size in an industry. 
C)  on the degree to which marginal revenue is greater than marginal cost (for a firm). 
D)  b and c 
E)  none of the above 
A)  on the degree to which foreign firms impact domestic competition. 
B)  about the dispersion of firm size in an industry. 
C)  on the degree to which marginal revenue is greater than marginal cost (for a firm). 
D)  b and c 
E)  none of the above

Question 3

If government regulators want a natural monopolist to earn only zero economic profits,then they will set a price

Accepted Answer

A)  equal to average total cost (AT
C) . 
B)  equal to marginal cost. 
C)  such that marginal revenue equals marginal cost. 
D)  none of the above 
A)  equal to average total cost (AT
C) . 
B)  equal to marginal cost. 
C)  such that marginal revenue equals marginal cost. 
D)  none of the above

Question 4

The capture theory of regulation holds that

Accepted Answer

A)  regardless of the motive for the initial regulation and the establishment of the regulatory agency, eventually the special interests of the industry that is being regulated will be "captured" (controlled) by the regulatory agency. 
B)  regardless of the motive for the initial regulation and the establishment of the regulatory agency, eventually the regulatory agency will be "captured" (controlled) by the special interests of the industry that is being regulated. 
C)  whether or not the special interests of the industry that is being regulated will be "captured" (controlled) by the regulatory agency depends on the motive for the initial regulation and the establishment of the regulatory agency. 
D)  whether or not the regulatory agency will be "captured" (controlled) by the special interests of the industry depends on the motive for the initial regulation and the establishment of the regulatory agency. 
A)  regardless of the motive for the initial regulation and the establishment of the regulatory agency, eventually the special interests of the industry that is being regulated will be "captured" (controlled) by the regulatory agency. 
B)  regardless of the motive for the initial regulation and the establishment of the regulatory agency, eventually the regulatory agency will be "captured" (controlled) by the special interests of the industry that is being regulated. 
C)  whether or not the special interests of the industry that is being regulated will be "captured" (controlled) by the regulatory agency depends on the motive for the initial regulation and the establishment of the regulatory agency. 
D)  whether or not the regulatory agency will be "captured" (controlled) by the special interests of the industry depends on the motive for the initial regulation and the establishment of the regulatory agency.

Question 5

Exhibit 26-2
  
-Refer to Exhibit 26-2.The four-firm concentration ratio in Year 5 was

Accepted Answer

A)  90 percent. 
B)  95 percent. 
C)  70 percent. 
D)  80 percent. 
E)  This cannot be determined from the given data. 
A)  90 percent. 
B)  95 percent. 
C)  70 percent. 
D)  80 percent. 
E)  This cannot be determined from the given data.

Question 6

The natural monopolist might have an incentive to go out of business under

Accepted Answer

A)  price regulation. 
B)  profit regulation. 
C)  output regulation. 
D)  average-cost pricing. 
E)  b and d 
A)  price regulation. 
B)  profit regulation. 
C)  output regulation. 
D)  average-cost pricing. 
E)  b and d

Question 7

The Celler-Kefauver Antimerger Act of 1950

Accepted Answer

A)  made interlocking directorates illegal. 
B)  banned anticompetitive mergers that occurred as a result of one company acquiring the physical assets of another company. 
C)  attempted to decrease the failure rate of small businesses by protecting them from the competition of large and growing chain stores. 
D)  both a and b 
E)  all of the above 
A)  made interlocking directorates illegal. 
B)  banned anticompetitive mergers that occurred as a result of one company acquiring the physical assets of another company. 
C)  attempted to decrease the failure rate of small businesses by protecting them from the competition of large and growing chain stores. 
D)  both a and b 
E)  all of the above

Question 8

Under profit regulation,a natural monopolist has an incentive to be very careful about minimizing costs.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 26-1
  
-Refer to Exhibit 26-1.Which of the following statements is false?

Accepted Answer

A)  If marginal-cost pricing is imposed on the natural monopoly firm, the firm takes a loss. 
B)  If average-cost pricing is imposed on the natural monopoly firm, the firm earns zero economic profits. 
C)  If the natural monopoly firm produces Q3 units of output and charges P3 per unit, the firm earns zero economic profits. 
D)  a and b 
E)  a, b, and c 
A)  If marginal-cost pricing is imposed on the natural monopoly firm, the firm takes a loss. 
B)  If average-cost pricing is imposed on the natural monopoly firm, the firm earns zero economic profits. 
C)  If the natural monopoly firm produces Q3 units of output and charges P3 per unit, the firm earns zero economic profits. 
D)  a and b 
E)  a, b, and c

Question 10

In Industry A,the largest four firms together have a 30 percent share of the market and there are a total of eight firms in the market.In Industry B,the largest four firms together have a 30 percent share of the market and there are 100 other firms in the market.If we want to distinguish between the concentration in these two industries,the best measure to use is the

Accepted Answer

A)  four-firm concentration ratio. 
B)  horizontal-merger index. 
C)  vertical-merger index. 
D)  Herfindahl index. 
E)  none of the above 
A)  four-firm concentration ratio. 
B)  horizontal-merger index. 
C)  vertical-merger index. 
D)  Herfindahl index. 
E)  none of the above

Question 11

Exhibit 26-2
  
-Refer to Exhibit 26-2.The four-firm concentration ratio in Year 1 was

Accepted Answer

A)  90 percent. 
B)  95 percent. 
C)  70 percent. 
D)  100 percent. 
E)  This cannot be determined from the given data. 
A)  90 percent. 
B)  95 percent. 
C)  70 percent. 
D)  100 percent. 
E)  This cannot be determined from the given data.

Question 12

Exhibit 26-4
  
-Refer to Exhibit 26-4.What is the productive-efficient level of output?

Accepted Answer

A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Q4. 
E)  Q5. 
A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Q4. 
E)  Q5.

Question 13

The public interest theory of regulation holds that regulators will

Accepted Answer

A)  make regulatory decisions that benefit them at the expense of the special interests they are regulating. 
B)  be slow to adopt sound economic principles to guide their regulatory decision-making. 
C)  do through regulation what is in the public's best interest. 
D)  say they are doing what is right for the public, but in reality they are doing what is right for themselves. 
E)  often take vacations at taxpayer's expense. 
A)  make regulatory decisions that benefit them at the expense of the special interests they are regulating. 
B)  be slow to adopt sound economic principles to guide their regulatory decision-making. 
C)  do through regulation what is in the public's best interest. 
D)  say they are doing what is right for the public, but in reality they are doing what is right for themselves. 
E)  often take vacations at taxpayer's expense.

Question 14

Which of the following is false?

Accepted Answer

A)  In 2009, the Justice Department applauded the use of an "agency pricing" model by the nation's largest publishers commenting that it would help to lower e-book prices. 
B)  The 2012 antitrust case filed against Apple Inc. and five of the nation's largest publishers charged that they were conspiring to raise e-book prices. 
C)  Apple Inc. contended that its entry into the e-book market in 2010 helped to "create tremendous growth in eBook titles, range and variety of offerings, sales, and improved quality of the eBook reading experience." 
D)  Some people have suggested that Amazon originally charged a price for some e-books that was less than the cost of the books in order to increase interest in its e-book reader, the Kindle. 
A)  In 2009, the Justice Department applauded the use of an "agency pricing" model by the nation's largest publishers commenting that it would help to lower e-book prices. 
B)  The 2012 antitrust case filed against Apple Inc. and five of the nation's largest publishers charged that they were conspiring to raise e-book prices. 
C)  Apple Inc. contended that its entry into the e-book market in 2010 helped to "create tremendous growth in eBook titles, range and variety of offerings, sales, and improved quality of the eBook reading experience." 
D)  Some people have suggested that Amazon originally charged a price for some e-books that was less than the cost of the books in order to increase interest in its e-book reader, the Kindle.

Question 15

Network goods such as telephones,computer operating systems and the like,will tend to become monopolies because consumers will naturally tend to buy from the largest supplier of the good.who will eventually become a monopoly.This monopoly position

Accepted Answer

A)  automatically violates the Sherman Antitrust Act 
B)  violates the Sherman Antitrust Act only if the company illegally acts to maintain their position 
C)  is automatically subject to FTC or state regulation and does not fall under the Sherman Antitrust Act 
D)  is not covered by the Sherman Antitrust Act 
A)  automatically violates the Sherman Antitrust Act 
B)  violates the Sherman Antitrust Act only if the company illegally acts to maintain their position 
C)  is automatically subject to FTC or state regulation and does not fall under the Sherman Antitrust Act 
D)  is not covered by the Sherman Antitrust Act

Question 16

Define the term lock-in effect and explain how this effect might make a network monopoly that benefits from it less likely to innovate.

Accepted Answer

The lock-in effect describes the situati

Question 17

If natural monopolies are regulated to produce where there is resource-allocative efficiency,they produce where

Accepted Answer

A)  price equals average total cost. 
B)  marginal revenue equals marginal cost. 
C)  price equals marginal cost. 
D)  marginal revenue equals average total cost. 
A)  price equals average total cost. 
B)  marginal revenue equals marginal cost. 
C)  price equals marginal cost. 
D)  marginal revenue equals average total cost.

Question 18

What is the difference between the public interest theory of regulation and the public choice theory of regulation?

Accepted Answer

The public interest theory of regulation

Question 19

The act that was passed in an attempt to decrease the failure rate of small businesses by protecting them from the competition of large and growing chain stores was the

Accepted Answer

A)  Wheeler-Lea Act. 
B)  Robinson-Patman Act. 
C)  Celler-Kefauver Antimerger Act. 
D)  Clayton Act. 
E)  Sherman Act. 
A)  Wheeler-Lea Act. 
B)  Robinson-Patman Act. 
C)  Celler-Kefauver Antimerger Act. 
D)  Clayton Act. 
E)  Sherman Act.

Question 20

Exhibit 26-2
  
-Refer to Exhibit 26-2.The four-firm concentration ratio in Year 3 was

Accepted Answer

A)  90 percent. 
B)  95 percent. 
C)  70 percent. 
D)  100 percent. 
E)  This cannot be determined from the given data. 
A)  90 percent. 
B)  95 percent. 
C)  70 percent. 
D)  100 percent. 
E)  This cannot be determined from the given data.

Exam 26: Government and Product Markets: Antitrust and Regulation

The Sherman Act of 1890 was passed with the intent of

The advantage of the Herfindahl index over the four- and eight-firm concentration ratios is that it provides information

If government regulators want a natural monopolist to earn only zero economic profits,then they will set a price

The capture theory of regulation holds that

Exhibit 26-2 -Refer to Exhibit 26-2.The four-firm concentration ratio in Year 5 was

The natural monopolist might have an incentive to go out of business under

The Celler-Kefauver Antimerger Act of 1950

Under profit regulation,a natural monopolist has an incentive to be very careful about minimizing costs.

Exhibit 26-1 -Refer to Exhibit 26-1.Which of the following statements is false?

Exhibit 26-2 -Refer to Exhibit 26-2.The four-firm concentration ratio in Year 1 was

Exhibit 26-4 -Refer to Exhibit 26-4.What is the productive-efficient level of output?

The public interest theory of regulation holds that regulators will

Which of the following is false?

Network goods such as telephones,computer operating systems and the like,will tend to become monopolies because consumers will naturally tend to buy from the largest supplier of the good.who will eventually become a monopoly.This monopoly position

Define the term lock-in effect and explain how this effect might make a network monopoly that benefits from it less likely to innovate.

If natural monopolies are regulated to produce where there is resource-allocative efficiency,they produce where

What is the difference between the public interest theory of regulation and the public choice theory of regulation?

The act that was passed in an attempt to decrease the failure rate of small businesses by protecting them from the competition of large and growing chain stores was the

Exhibit 26-2 -Refer to Exhibit 26-2.The four-firm concentration ratio in Year 3 was

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