Question 1

Why are the prices of some regulated industries often higher than they would be if there were no regulation?

Accepted Answer

Regulators are often concerned to preven

Question 2

Economies of scope are savings acquired by

Accepted Answer

A)  producing many goods simultaneously. 
B)  producing enough of one good to reach the minimum efficient scale of production. 
C)  selling one product at a loss but selling other products at a profit. 
D)  decreasing the regulation of an industry. 
A)  producing many goods simultaneously. 
B)  producing enough of one good to reach the minimum efficient scale of production. 
C)  selling one product at a loss but selling other products at a profit. 
D)  decreasing the regulation of an industry.

Question 3

Discuss the advantages of the Herfindahl-Hirschman Index compared with the four-firm concentration ratio.

Accepted Answer

Unlike the four-firm concentration ratio

Question 4

When it is cheaper for one firm to produce a number of different commodities together than it is for a group of small firms to produce those commodities, ____ exist(s).

Accepted Answer

A)  economies of scale 
B)  economies of scope 
C)  diminishing marginal returns 
D)  marginal-cost pricing 
A)  economies of scale 
B)  economies of scope 
C)  diminishing marginal returns 
D)  marginal-cost pricing

Question 5

A merger occurs when two previously independent firms are combined under a single owner.

Accepted Answer

A) True 
 B)False

Question 6

Explain why firms that enjoy economies of scale or scope are candidates for regulation.

Accepted Answer

Where economies of scale exist, one firm

Question 7

If a firm is a natural monopoly, society will benefit if it is broken into several small companies.

Accepted Answer

A) True 
 B)False

Question 8

Powers of many regulatory agencies are designed to protect public health and safety.

Accepted Answer

A) True 
 B)False

Question 9

If average cost is declining,

Accepted Answer

A)  marginal cost must be below average cost. 
B)  firms would go bankrupt if all prices were set equal to marginal costs. 
C)  marginal cost may be declining or increasing. 
D)  All of the above are correct. 
A)  marginal cost must be below average cost. 
B)  firms would go bankrupt if all prices were set equal to marginal costs. 
C)  marginal cost may be declining or increasing. 
D)  All of the above are correct.

Question 10

Regulating an industry to remove all economic profit

Accepted Answer

A)  removes all incentive for efficiency and responsiveness to consumer demand. 
B)  removes distortions caused by cross subsidies. 
C)  removes allocative inefficiency. 
D)  increases incentives to be productively efficient. 
A)  removes all incentive for efficiency and responsiveness to consumer demand. 
B)  removes distortions caused by cross subsidies. 
C)  removes allocative inefficiency. 
D)  increases incentives to be productively efficient.

Question 11

Which of the following acts prohibits directors of one company from sitting on the board of a competitor?

Accepted Answer

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

Question 12

In a market with only one firm (a pure monopoly), the Herfindahl-Hirschman Index (HHI) would equal 10,000.

Accepted Answer

A) True 
 B)False

Question 13

Policies that preclude the deliberate creation of monopoly and undesirable practices are called

Accepted Answer

A)  antitrust policies. 
B)  anti-monopoly policies. 
C)  anti-competitive policies. 
D)  socialism. 
A)  antitrust policies. 
B)  anti-monopoly policies. 
C)  anti-competitive policies. 
D)  socialism.

Question 14

High prices redistribute wealth from consumers to firms.

Accepted Answer

A) True 
 B)False

Question 15

Increasing concentration always means an industry has become effectively monopolized.

Accepted Answer

A) True 
 B)False

Question 16

Regulation of industry is usually carried out by special government agencies that administer and interpret the law.

Accepted Answer

A) True 
 B)False

Question 17

Using specialized equipment to produce simultaneously a number of similar items

Accepted Answer

A)  leads to economies of scale. 
B)  is the goal of deregulation. 
C)  can only happen in a high technology nation. 
D)  is called economies of scope. 
A)  leads to economies of scale. 
B)  is the goal of deregulation. 
C)  can only happen in a high technology nation. 
D)  is called economies of scope.

Question 18

Modern antitrust policy began in response to

Accepted Answer

A)  abuses of market power in the oil industry. 
B)  the inability of railroads to compete effectively with the new trucking industry. 
C)  the charge that the rights of big business were not adequately protected. 
D)  attempts by business leaders to pack Congress with corrupt legislators. 
A)  abuses of market power in the oil industry. 
B)  the inability of railroads to compete effectively with the new trucking industry. 
C)  the charge that the rights of big business were not adequately protected. 
D)  attempts by business leaders to pack Congress with corrupt legislators.

Question 19

List and discuss the importance of the major effects of the deregulation that occurred in the 1980s.

Accepted Answer

Baumol and Blinder list five effects:
1.

Question 20

In regulated industries, the optimal regulation is to set price such that MC=P.

Accepted Answer

A) True 
 B)False

Exam 13: Limiting Market Power: Regulation and Antitrust

Why are the prices of some regulated industries often higher than they would be if there were no regulation?

Economies of scope are savings acquired by

Discuss the advantages of the Herfindahl-Hirschman Index compared with the four-firm concentration ratio.

When it is cheaper for one firm to produce a number of different commodities together than it is for a group of small firms to produce those commodities, ____ exist(s).

A merger occurs when two previously independent firms are combined under a single owner.

Explain why firms that enjoy economies of scale or scope are candidates for regulation.

If a firm is a natural monopoly, society will benefit if it is broken into several small companies.

Powers of many regulatory agencies are designed to protect public health and safety.

If average cost is declining,

Regulating an industry to remove all economic profit

Which of the following acts prohibits directors of one company from sitting on the board of a competitor?

In a market with only one firm (a pure monopoly), the Herfindahl-Hirschman Index (HHI) would equal 10,000.

Policies that preclude the deliberate creation of monopoly and undesirable practices are called

High prices redistribute wealth from consumers to firms.

Increasing concentration always means an industry has become effectively monopolized.

Regulation of industry is usually carried out by special government agencies that administer and interpret the law.

Using specialized equipment to produce simultaneously a number of similar items

Modern antitrust policy began in response to

List and discuss the importance of the major effects of the deregulation that occurred in the 1980s.

In regulated industries, the optimal regulation is to set price such that MC=P.

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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