Question 1

The federal government is most likely to oppose

Accepted Answer

A)  the purchase of a firm in danger of bankruptcy by a successful firm. 
B)  a merger between two firms in a perfectly competitive industry. 
C)  the purchase of one oligopolist by another in an industry with contestable markets. 
D)  a merger between two firms in a three-firm industry. 
A)  the purchase of a firm in danger of bankruptcy by a successful firm. 
B)  a merger between two firms in a perfectly competitive industry. 
C)  the purchase of one oligopolist by another in an industry with contestable markets. 
D)  a merger between two firms in a three-firm industry.

Question 2

Over the course of the twentieth century there has been no pronounced tendency for concentration in the United States to increase.

Accepted Answer

A) True 
 B)False

Question 3

Microsoft is accused of which anti-competitive practice?

Accepted Answer

A)  interlocking directorates 
B)  illegal "bundling" of products 
C)  exclusive contracts 
D)  predatory pricing 
A)  interlocking directorates 
B)  illegal "bundling" of products 
C)  exclusive contracts 
D)  predatory pricing

Question 4

Firms with monopoly power tend to be more efficient than competitive firms.

Accepted Answer

A) True 
 B)False

Question 5

One reason regulators push for higher prices in an industry is to

Accepted Answer

A)  prevent excess profits in the industry. 
B)  protect the public from excessively low prices. 
C)  encourage usage of the good or service. 
D)  protect against the demise of existing firms. 
A)  prevent excess profits in the industry. 
B)  protect the public from excessively low prices. 
C)  encourage usage of the good or service. 
D)  protect against the demise of existing firms.

Question 6

What would the Herfindahl-Hirschman Index equal for an industry consisting of 20 firms with each holding a 5% market share?

Accepted Answer

A)  20 
B)  100 
C)  500 
D)  2,500 
A)  20 
B)  100 
C)  500 
D)  2,500

Question 7

Many regulated industries are not pure monopolies.

Accepted Answer

A) True 
 B)False

Question 8

The government considers a market to be unconcentrated if its HHI number is less than ____, and highly concentrated if that number exceeds ____.

Accepted Answer

A)  1,000; 1,800 
B)  100; 9,000 
C)  50; 500 
D)  500; 1,300 
A)  1,000; 1,800 
B)  100; 9,000 
C)  50; 500 
D)  500; 1,300

Question 9

When it is cheaper for one firm to produce a particular product, ____ exist(s).

Accepted Answer

A)  economies of scale 
B)  economies of scope 
C)  diminishing marginal returns 
D)  cross-subsidization 
A)  economies of scale 
B)  economies of scope 
C)  diminishing marginal returns 
D)  cross-subsidization

Question 10

In highly contestable markets, increases in concentration will enhance market power.

Accepted Answer

A) True 
 B)False

Question 11

Concentration increases in an industry

Accepted Answer

A)  if the larger firms gain control of important resources, squeezing out smaller firms. 
B)  if some firms become technologically superior over time. 
C)  if innovation increases plant size of some firms and lowers their cost. 
D)  All of the above are correct. 
A)  if the larger firms gain control of important resources, squeezing out smaller firms. 
B)  if some firms become technologically superior over time. 
C)  if innovation increases plant size of some firms and lowers their cost. 
D)  All of the above are correct.

Question 12

Firm A's motive in filing an antitrust suit against Firm B may be

Accepted Answer

A)  to seek court protection against genuinely unfair practices by Firm B. 
B)  to seek financial compensation for damages caused by Firm B. 
C)  to create an expensive nuisance for Firm B. 
D)  All of the above are correct. 
A)  to seek court protection against genuinely unfair practices by Firm B. 
B)  to seek financial compensation for damages caused by Firm B. 
C)  to create an expensive nuisance for Firm B. 
D)  All of the above are correct.

Question 13

Which of the following events would increase the four-firm concentration ratio in a milk industry with six firms?

Accepted Answer

A)  The two largest milk producers merge. 
B)  The largest milk producer buys an ice cream-making plant. 
C)  The largest milk producer lures customers away from the second-largest producer. 
D)  The four largest milk producers collusively fix prices. 
A)  The two largest milk producers merge. 
B)  The largest milk producer buys an ice cream-making plant. 
C)  The largest milk producer lures customers away from the second-largest producer. 
D)  The four largest milk producers collusively fix prices.

Question 14

Deregulation has dramatically decreased airline safety.

Accepted Answer

A) True 
 B)False

Question 15

Consider an industry consisting of four firms with market shares of 30 percent, 25 percent, 25 percent, and 20 percent.Calculate the Herfindahl Hirschman Index and interpret your result.

Accepted Answer

HHI = (30² + 25² + 25² + 20²)

Question 16

Deregulation of the airline and trucking industry has (i) resulted in considerable entry of new firms, and (ii) has forced unions in these industries to make large concessions on wages and working conditions.

Accepted Answer

A)  i and ii 
B)  i but not ii 
C)  ii but not i 
D)  neither i nor ii 
A)  i and ii 
B)  i but not ii 
C)  ii but not i 
D)  neither i nor ii

Question 17

As an apparent result of airline deregulation,

Accepted Answer

A)  many small communities have been left without airline service. 
B)  the wages and benefits of airline workers have been reduced. 
C)  air fares have risen more quickly than they probably would have under continued regulation. 
D)  small commuter airlines have almost vanished. 
A)  many small communities have been left without airline service. 
B)  the wages and benefits of airline workers have been reduced. 
C)  air fares have risen more quickly than they probably would have under continued regulation. 
D)  small commuter airlines have almost vanished.

Question 18

The main instrument of control of public monopolies is the regulatory agency.

Accepted Answer

A) True 
 B)False

Question 19

Concentration ratios have not been studied much in the last century.

Accepted Answer

A) True 
 B)False

Question 20

A policy of marginal-cost pricing will ensure that many regulated industries will lose money.

Accepted Answer

A) True 
 B)False

Exam 13: Limiting Market Power: Regulation and Antitrust

The federal government is most likely to oppose

Over the course of the twentieth century there has been no pronounced tendency for concentration in the United States to increase.

Microsoft is accused of which anti-competitive practice?

Firms with monopoly power tend to be more efficient than competitive firms.

One reason regulators push for higher prices in an industry is to

What would the Herfindahl-Hirschman Index equal for an industry consisting of 20 firms with each holding a 5% market share?

Many regulated industries are not pure monopolies.

The government considers a market to be unconcentrated if its HHI number is less than ____, and highly concentrated if that number exceeds ____.

When it is cheaper for one firm to produce a particular product, ____ exist(s).

In highly contestable markets, increases in concentration will enhance market power.

Concentration increases in an industry

Firm A's motive in filing an antitrust suit against Firm B may be

Which of the following events would increase the four-firm concentration ratio in a milk industry with six firms?

Deregulation has dramatically decreased airline safety.

Consider an industry consisting of four firms with market shares of 30 percent, 25 percent, 25 percent, and 20 percent.Calculate the Herfindahl Hirschman Index and interpret your result.

Deregulation of the airline and trucking industry has (i) resulted in considerable entry of new firms, and (ii) has forced unions in these industries to make large concessions on wages and working conditions.

As an apparent result of airline deregulation,

The main instrument of control of public monopolies is the regulatory agency.

Concentration ratios have not been studied much in the last century.

A policy of marginal-cost pricing will ensure that many regulated industries will lose money.

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

Filters

The government considers a market to be unconcentrated if its HHI number is less than , and highly concentrated if that number exceeds .