Question 1

The Department of Justice generally

Accepted Answer

A)  is not involved in merger policy. 
B)  opposes horizontal mergers but permits conglomerate mergers. 
C)  opposes only mergers that might reduce competition. 
D)  opposes mergers whose apparent motive is obtaining economies of scale. 
A)  is not involved in merger policy. 
B)  opposes horizontal mergers but permits conglomerate mergers. 
C)  opposes only mergers that might reduce competition. 
D)  opposes mergers whose apparent motive is obtaining economies of scale.

Question 2

Briefly and concisely define the following terms:
a.price discrimination
b.tying contracts
c.concentration ratio
d.market power

Accepted Answer

a.Price discrimination occurs when diffe

Question 3

A monopoly firm operates with declining marginal cost.If regulators impose marginal cost pricing, the market will

Accepted Answer

A)  remain a monopoly but behave like a perfectly competitive industry. 
B)  become perfectly competitive. 
C)  be entered by additional firms but will not necessarily become perfectly competitive. 
D)  be exited by the existing firm if the regulators will let the firm leave the market. 
A)  remain a monopoly but behave like a perfectly competitive industry. 
B)  become perfectly competitive. 
C)  be entered by additional firms but will not necessarily become perfectly competitive. 
D)  be exited by the existing firm if the regulators will let the firm leave the market.

Question 4

All large firms have monopoly power.

Accepted Answer

A) True 
 B)False

Question 5

Before the breakup of AT&T several years ago, profits on long-distance calls offset losses on basic residential service.This practice is known as

Accepted Answer

A)  abuse of monopolistic power. 
B)  cream skimming. 
C)  cross-subsidization. 
D)  the Ramsey rule. 
A)  abuse of monopolistic power. 
B)  cream skimming. 
C)  cross-subsidization. 
D)  the Ramsey rule.

Question 6

What would the Herfindahl-Hirschman Index equal for an industry consisting of six firms with market shares of 40%, 30%, 20%, 5%, 3%, and 2%?

Accepted Answer

A)  0.95 
B)  2.934 
C)  2,938 
D)  10,000 
A)  0.95 
B)  2.934 
C)  2,938 
D)  10,000

Question 7

In many regulated industries, marginal cost will be

Accepted Answer

A)  below average cost. 
B)  above total cost. 
C)  above marginal fixed cost. 
D)  below incremental cost. 
A)  below average cost. 
B)  above total cost. 
C)  above marginal fixed cost. 
D)  below incremental cost.

Question 8

What is the primary threat of monopoly and oligopoly to the public interest?

Accepted Answer

A)  Cartels 
B)  Predatory pricing 
C)  Price wars 
D)  Monopoly power 
A)  Cartels 
B)  Predatory pricing 
C)  Price wars 
D)  Monopoly power

Question 9

List appropriate criteria for deciding whether a merger of two firms producing similar products should be permitted.

Accepted Answer

Mergers that take place between two firm

Question 10

On balance, does market power promote or retard technological innovation?

Accepted Answer

The evidence is not clear-cut.While smal

Question 11

The most important advantages of bigness will be found in industries that show increasing returns to scale.

Accepted Answer

A) True 
 B)False

Question 12

One possible solution to improve performance of regulated firms is which of the following?

Accepted Answer

A)  Allow the firm to set its own rate of return. 
B)  Allow higher rates of return to cover higher cost of better performance. 
C)  Allow a higher rate of return for better performance. 
D)  Set lower prices when efficiency improves. 
A)  Allow the firm to set its own rate of return. 
B)  Allow higher rates of return to cover higher cost of better performance. 
C)  Allow a higher rate of return for better performance. 
D)  Set lower prices when efficiency improves.

Question 13

The concept of economies of scope describes the savings acquired from simultaneous production of different products.

Accepted Answer

A) True 
 B)False

Question 14

In the case of Intimate Bookshop v.Barnes & Noble, Intimate alleged that Barnes & Noble

Accepted Answer

A)  was bundling products in order to reduce competition. 
B)  used technological advances to sell at lower prices. 
C)  was buying books at discriminatory prices. 
D)  had merged with other competitors in an effort to gain monopoly power. 
A)  was bundling products in order to reduce competition. 
B)  used technological advances to sell at lower prices. 
C)  was buying books at discriminatory prices. 
D)  had merged with other competitors in an effort to gain monopoly power.

Question 15

Service to consumers of deregulated products has generally not diminished.

Accepted Answer

A) True 
 B)False

Question 16

The aim of antitrust policy is to

Accepted Answer

A)  provide adequate incentives for inventors and entrepreneurs. 
B)  prevent firms from acquiring or exercising undue market power. 
C)  prevent firms from becoming very large. 
D)  regulate the prices charged by oligopolies. 
A)  provide adequate incentives for inventors and entrepreneurs. 
B)  prevent firms from acquiring or exercising undue market power. 
C)  prevent firms from becoming very large. 
D)  regulate the prices charged by oligopolies.

Question 17

An economist is told that concentration in the cement industry has increased.He can safely conclude that

Accepted Answer

A)  cement production must have fallen in the industry. 
B)  competition in the cement industry has decreased. 
C)  there are fewer cement producers than before. 
D)  All of the above are correct. 
A)  cement production must have fallen in the industry. 
B)  competition in the cement industry has decreased. 
C)  there are fewer cement producers than before. 
D)  All of the above are correct.

Question 18

Changes in the rate charged by electric power companies are subject to government control because

Accepted Answer

A)  the electric power companies are government enterprises. 
B)  consumer ignorance makes it impossible to know what rates are fair. 
C)  the electric power companies are monopolies of a service that is important to buyers. 
D)  cutthroat competition would probably occur if the government did not intervene. 
A)  the electric power companies are government enterprises. 
B)  consumer ignorance makes it impossible to know what rates are fair. 
C)  the electric power companies are monopolies of a service that is important to buyers. 
D)  cutthroat competition would probably occur if the government did not intervene.

Question 19

What would the Herfindahl-Hirschman Index equal for an industry consisting of six firms with market shares of 5%, 10%, 15%, 20%, 25%, and 25%?

Accepted Answer

A)  100 
B)  1,350 
C)  1,375 
D)  2,000 
A)  100 
B)  1,350 
C)  1,375 
D)  2,000

Question 20

Briefly review the history of antitrust legislation in the United States.

Accepted Answer

The Sherman Act of 1890 prohibited all c

Exam 13: Limiting Market Power: Regulation and Antitrust

The Department of Justice generally

Briefly and concisely define the following terms: a.price discrimination b.tying contracts c.concentration ratio d.market power

A monopoly firm operates with declining marginal cost.If regulators impose marginal cost pricing, the market will

All large firms have monopoly power.

Before the breakup of AT&T several years ago, profits on long-distance calls offset losses on basic residential service.This practice is known as

What would the Herfindahl-Hirschman Index equal for an industry consisting of six firms with market shares of 40%, 30%, 20%, 5%, 3%, and 2%?

In many regulated industries, marginal cost will be

What is the primary threat of monopoly and oligopoly to the public interest?

List appropriate criteria for deciding whether a merger of two firms producing similar products should be permitted.

On balance, does market power promote or retard technological innovation?

The most important advantages of bigness will be found in industries that show increasing returns to scale.

One possible solution to improve performance of regulated firms is which of the following?

The concept of economies of scope describes the savings acquired from simultaneous production of different products.

In the case of Intimate Bookshop v.Barnes & Noble, Intimate alleged that Barnes & Noble

Service to consumers of deregulated products has generally not diminished.

The aim of antitrust policy is to

An economist is told that concentration in the cement industry has increased.He can safely conclude that

Changes in the rate charged by electric power companies are subject to government control because

What would the Herfindahl-Hirschman Index equal for an industry consisting of six firms with market shares of 5%, 10%, 15%, 20%, 25%, and 25%?

Briefly review the history of antitrust legislation in the United States.

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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