Question 1

Which is the most likely solution to addressing the market power of new firms such as Google and Facebook?

Accepted Answer

A)  Breaking up the firms 
B)  Regulating their use of consumer data 
C)  Setting a maximum price for their services 
D)  Converting the firms to utilities 
A)  Breaking up the firms 
B)  Regulating their use of consumer data 
C)  Setting a maximum price for their services 
D)  Converting the firms to utilities

Question 2

The central element of the oligopoly model is that each firm produces a differentiated product.

Accepted Answer

A) True 
 B)False

Question 3

Refer to the table above. Using the four-firm concentration ratio, the upholstered furniture industry is best categorized as: $$\begin{array} { | c | c | c | } 
\hline \text { Industry } & \begin{array} { c } 
\text { Number of } \
\text { sellers }
\end{array} & \begin{array} { c } 
\text { \% of shipments accuunted far by the } 4 \
\text { larget comnanies }
\end{array} \
\hline \text { Tires } & 15 & 95 \
\hline \begin{array} { c } 
\text { Upholstered } \
\text { furniture }
\end{array} & 2,000 & 15 \
\hline
\end{array}$$

Accepted Answer

A)  perfectly competitive. 
B)  a pure monopoly. 
C)  monopolistically competitive. 
D)  oligopolistic. 
A)  perfectly competitive. 
B)  a pure monopoly. 
C)  monopolistically competitive. 
D)  oligopolistic.

Question 4

In the ALCOA antitrust case in 1945, the Court ruled that the:

Accepted Answer

A)  company had a monopolistic structure and therefore should be broken up. 
B)  company was guilty of unfair business practices and therefore should be broken up. 
C)  Sherman Antitrust Act did not apply. 
D)  two companies had to be disbanded. 
A)  company had a monopolistic structure and therefore should be broken up. 
B)  company was guilty of unfair business practices and therefore should be broken up. 
C)  Sherman Antitrust Act did not apply. 
D)  two companies had to be disbanded.

Question 5

When government uses the judgment by performance criterion, a firm is considered a monopoly if it controls a significant segment of the market.

Accepted Answer

A) True 
 B)False

Question 6

According to the contestable market model, the higher an industry's concentration ratio, the more profitable the industry.

Accepted Answer

A) True 
 B)False

Question 7

From society's perspective, a possible benefit of a cartel is that it could:

Accepted Answer

A)  provide incentives for firms to cooperate in setting price and output. 
B)  not earn economic profits. 
C)  minimize average total costs. 
D)  provide incentives for the introduction of superior products by competitors. 
A)  provide incentives for firms to cooperate in setting price and output. 
B)  not earn economic profits. 
C)  minimize average total costs. 
D)  provide incentives for the introduction of superior products by competitors.

Question 8

Refer to the graph shown. If a firm operating as if it were faced with a kinked demand curve believes that if it lowers price from P2 to P4, its rival will match the price cut, then:

Accepted Answer

A)  the demand curve used by the firm for decision making is highly elastic. 
B)  it probably will lower price, since doing so will increase sales. 
C)  it probably won't lower price, since the percentage decline in price will exceed the percentage increase in quantity sold. 
D)  D1 is the relevant demand curve. 
A)  the demand curve used by the firm for decision making is highly elastic. 
B)  it probably will lower price, since doing so will increase sales. 
C)  it probably won't lower price, since the percentage decline in price will exceed the percentage increase in quantity sold. 
D)  D1 is the relevant demand curve.

Question 9

According to the kinked demand curve theory of sticky prices, in an oligopolistic market:

Accepted Answer

A)  a price decrease by one firm will not be followed by the other firms. 
B)  a price increase by one firm will be followed by the other firms. 
C)  the kinked demand curve is inelastic in the upper portion and elastic in the lower portion of the curve. 
D)  the kinked demand curve is elastic in the upper portion and inelastic in the lower portion of the curve. 
A)  a price decrease by one firm will not be followed by the other firms. 
B)  a price increase by one firm will be followed by the other firms. 
C)  the kinked demand curve is inelastic in the upper portion and elastic in the lower portion of the curve. 
D)  the kinked demand curve is elastic in the upper portion and inelastic in the lower portion of the curve.

Question 10

The higher an industry's concentration ratio is, the more competitive the industry is.

Accepted Answer

A) True 
 B)False

Question 11

An important antitrust concern about new companies such as Google and Facebook is that they:

Accepted Answer

A)  charge monopoly prices for their services. 
B)  use data on their customers to direct ads. 
C)  do not have incentives to innovate. 
D)  benefit from first-mover advantage. 
A)  charge monopoly prices for their services. 
B)  use data on their customers to direct ads. 
C)  do not have incentives to innovate. 
D)  benefit from first-mover advantage.

Question 12

Strategic decision making is most important in:

Accepted Answer

A)  competitive markets. 
B)  monopolistically competitive markets. 
C)  oligopolistic markets. 
D)  monopolistic markets. 
A)  competitive markets. 
B)  monopolistically competitive markets. 
C)  oligopolistic markets. 
D)  monopolistic markets.

Question 13

One advantage of the Herfindahl index over the concentration ratio is that it:

Accepted Answer

A)  takes into account only the leading firms in an industry. 
B)  gives extra weight to firms that are especially large. 
C)  tells about only the top 50 firms in an industry. 
D)  is easier to calculate. 
A)  takes into account only the leading firms in an industry. 
B)  gives extra weight to firms that are especially large. 
C)  tells about only the top 50 firms in an industry. 
D)  is easier to calculate.

Question 14

In the cartel model of oligopoly, the firms would decide how much to produce where:

Accepted Answer

A)  marginal cost equals marginal revenue. 
B)  marginal cost equals price. 
C)  marginal cost equals average total cost. 
D)  the kink in the demand curve is. 
A)  marginal cost equals marginal revenue. 
B)  marginal cost equals price. 
C)  marginal cost equals average total cost. 
D)  the kink in the demand curve is.

Question 15

According to the contestable market model, if there are no barriers to entry or exit, the price an oligopolist sets will be equivalent to average total cost.

Accepted Answer

A) True 
 B)False

Question 16

The primary criterion governing U.S. antitrust policy until 1945 was:

Accepted Answer

A)  laissez-faire. 
B)  concentration ratios. 
C)  judgment by performance. 
D)  judgment by structure. 
A)  laissez-faire. 
B)  concentration ratios. 
C)  judgment by performance. 
D)  judgment by structure.

Question 17

When government uses the judgment by structure criterion, a firm is considered a monopoly only if, for example, it charges excessive prices.

Accepted Answer

A) True 
 B)False

Question 18

An attorney for a firm that is arguing that its market is competitive rather than monopolistic would be most likely to argue that the relevant market is shown by a:

Accepted Answer

A)  three-digit North American Industry Classification System (NAICS) industry. 
B)  four-digit North American Industry Classification System (NAICS) industry. 
C)  five-digit North American Industry Classification System (NAICS) industry. 
D)  six-digit North American Industry Classification System (NAICS) industry. 
A)  three-digit North American Industry Classification System (NAICS) industry. 
B)  four-digit North American Industry Classification System (NAICS) industry. 
C)  five-digit North American Industry Classification System (NAICS) industry. 
D)  six-digit North American Industry Classification System (NAICS) industry.

Question 19

An important way in which globalization changed U.S. antitrust policy is:

Accepted Answer

A)  global corporations face stricter policies in foreign countries, allowing the United States to be less active. 
B)  global corporations cannot be sued for antitrust violations, keeping U.S. courts from enforcing laws. 
C)  Americans hold more shares of international corporations, placing pressure on foreign firms to perform. 
D)  foreign governments are more lax when it comes to antitrust laws, putting pressure on the United States to follow. 
A)  global corporations face stricter policies in foreign countries, allowing the United States to be less active. 
B)  global corporations cannot be sued for antitrust violations, keeping U.S. courts from enforcing laws. 
C)  Americans hold more shares of international corporations, placing pressure on foreign firms to perform. 
D)  foreign governments are more lax when it comes to antitrust laws, putting pressure on the United States to follow.

Question 20

For a cartel to be successful in increasing economic profits for its members:

Accepted Answer

A)  entry of new firms must be blocked. 
B)  price must be set equal to marginal cost. 
C)  individual firms must be encouraged to adjust output so as to maximize their own profits at the cartel price. 
D)  price must be set equal to average total cost. 
A)  entry of new firms must be blocked. 
B)  price must be set equal to marginal cost. 
C)  individual firms must be encouraged to adjust output so as to maximize their own profits at the cartel price. 
D)  price must be set equal to average total cost.

Exam 15: Oligopoly and Antitrust Policy

Which is the most likely solution to addressing the market power of new firms such as Google and Facebook?

The central element of the oligopoly model is that each firm produces a differentiated product.

Refer to the table above. Using the four-firm concentration ratio, the upholstered furniture industry is best categorized as: Industry Number of sellers \% of shipments accuunted far by the 4 larget comnanies Tires 15 95 Upholstered furniture 2,000 15

In the ALCOA antitrust case in 1945, the Court ruled that the:

When government uses the judgment by performance criterion, a firm is considered a monopoly if it controls a significant segment of the market.

According to the contestable market model, the higher an industry's concentration ratio, the more profitable the industry.

From society's perspective, a possible benefit of a cartel is that it could:

Refer to the graph shown. If a firm operating as if it were faced with a kinked demand curve believes that if it lowers price from P2 to P4, its rival will match the price cut, then:

According to the kinked demand curve theory of sticky prices, in an oligopolistic market:

The higher an industry's concentration ratio is, the more competitive the industry is.

An important antitrust concern about new companies such as Google and Facebook is that they:

Strategic decision making is most important in:

One advantage of the Herfindahl index over the concentration ratio is that it:

In the cartel model of oligopoly, the firms would decide how much to produce where:

According to the contestable market model, if there are no barriers to entry or exit, the price an oligopolist sets will be equivalent to average total cost.

The primary criterion governing U.S. antitrust policy until 1945 was:

When government uses the judgment by structure criterion, a firm is considered a monopoly only if, for example, it charges excessive prices.

An attorney for a firm that is arguing that its market is competitive rather than monopolistic would be most likely to argue that the relevant market is shown by a:

An important way in which globalization changed U.S. antitrust policy is:

For a cartel to be successful in increasing economic profits for its members:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Filters

Refer to the graph shown. If a firm operating as if it were faced with a kinked demand curve believes that if it lowers price from P₂ to P₄, its rival will match the price cut, then: