Question 1

Economies of scale imply:
(i) a continuously falling AC curve; (ii) a larger output is more efficient than a smaller output.

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 2

By definition, an industry with high concentration also is highly competitive.

Accepted Answer

A) True 
 B)False

Question 3

Deregulation of the airline and trucking industries was followed by the creation of many new firms.

Accepted Answer

A) True 
 B)False

Question 4

Serious concern for deregulation began to appear in Congress in the 1970s.

Accepted Answer

A) True 
 B)False

Question 5

Economists cite some beneficial effects of price discrimination.What are these benefits and how do the antitrust laws treat price discrimination?

Accepted Answer

Benefits include the ability to sell a p

Question 6

Bigness, or large firms, may benefit consumers in which of the following ways?

Accepted Answer

A)  Larger firms usually charge lower prices than smaller firms. 
B)  Larger firms with monopoly power definitely have greater incentive to be efficient and innovative. 
C)  Larger firms may take advantage of economies of scale and scope. 
D)  Larger firms are more responsive to consumers' desires. 
A)  Larger firms usually charge lower prices than smaller firms. 
B)  Larger firms with monopoly power definitely have greater incentive to be efficient and innovative. 
C)  Larger firms may take advantage of economies of scale and scope. 
D)  Larger firms are more responsive to consumers' desires.

Question 7

Which of the following acts prohibited predatory pricing?

Accepted Answer

A)  Robinson-Patman Act 
B)  Tunney Act 
C)  Clayton Act 
D)  Sherman Act 
A)  Robinson-Patman Act 
B)  Tunney Act 
C)  Clayton Act 
D)  Sherman Act

Question 8

The share of industry output sold by the top four steel producers in the country are 19%, 15%, 12%, and 9% respectively.The four-firm concentration ratio for the steel industry is

Accepted Answer

A)  0.19. 
B)  0.55 
C)  0.138 
D)  0.65 
A)  0.19. 
B)  0.55 
C)  0.138 
D)  0.65

Question 9

The Justice Department and the Federal Trade Commission are likely to oppose mergers

Accepted Answer

A)  that seem likely to increase efficiency. 
B)  that create a larger firm with economies of scale in a contestable market. 
C)  which will help one of the merging firms out of financial difficulties. 
D)  which threaten to reduce competition. 
A)  that seem likely to increase efficiency. 
B)  that create a larger firm with economies of scale in a contestable market. 
C)  which will help one of the merging firms out of financial difficulties. 
D)  which threaten to reduce competition.

Question 10

Microsoft has been accused of violating an antitrust law pertaining to bundling.

Accepted Answer

A) True 
 B)False

Question 11

The prices that are in the public's best interest will

Accepted Answer

A)  always allow the regulated firm to break even. 
B)  always allow the regulated firm to make positive economic profits. 
C)  sometimes leave the regulated firm with economic losses. 
D)  leave the regulated firm with profits that are about 10 percent higher than those of other firms. 
A)  always allow the regulated firm to break even. 
B)  always allow the regulated firm to make positive economic profits. 
C)  sometimes leave the regulated firm with economic losses. 
D)  leave the regulated firm with profits that are about 10 percent higher than those of other firms.

Question 12

Which of the following is a valid effect of monopoly power?

Accepted Answer

A)  Desirable effects on the distribution of wealth. 
B)  Efficient resource allocation. 
C)  Fostering of innovation. 
D)  Obstacle to efficiency. 
A)  Desirable effects on the distribution of wealth. 
B)  Efficient resource allocation. 
C)  Fostering of innovation. 
D)  Obstacle to efficiency.

Question 13

Beginning in the mid-1970s, Congress deregulated several industries including airlines and trucking.

Accepted Answer

A) True 
 B)False

Question 14

Antitrust laws prohibit undesirable business practices by firms holding monopoly power.

Accepted Answer

A) True 
 B)False

Question 15

Cross-subsidization implies that a loss from one product's sales will be made up by the profit from another product's sales.

Accepted Answer

A) True 
 B)False

Question 16

A regulatory agency concerned with "universal service" must

Accepted Answer

A)  prevent high profits in all markets. 
B)  prevent entry in high-profit markets. 
C)  prevent cross-subsidization. 
D)  guarantee marginal cost pricing. 
A)  prevent high profits in all markets. 
B)  prevent entry in high-profit markets. 
C)  prevent cross-subsidization. 
D)  guarantee marginal cost pricing.

Question 17

Discuss some of the reasons why monopoly power is considered undesirable.

Accepted Answer

Some of the reasons are:
1.Hig

Question 18

"Economies of scope" occur when

Accepted Answer

A)  fixed costs are high and marginal costs are low. 
B)  a monopoly can produce for the entire market. 
C)  similar production techniques can be applied to several products. 
D)  costs are fully distributed. 
A)  fixed costs are high and marginal costs are low. 
B)  a monopoly can produce for the entire market. 
C)  similar production techniques can be applied to several products. 
D)  costs are fully distributed.

Question 19

The four-firm concentration ratio for an industry is

Accepted Answer

A)  the number of firms in the industry, divided by four. 
B)  the share of industry output sold by the four largest firms in the industry. 
C)  the percentage of total industry profits claimed by the four largest firms. 
D)  the share of industry output sold by the fourth largest firm in the industry. 
A)  the number of firms in the industry, divided by four. 
B)  the share of industry output sold by the four largest firms in the industry. 
C)  the percentage of total industry profits claimed by the four largest firms. 
D)  the share of industry output sold by the fourth largest firm in the industry.

Question 20

The Federal Trade Commission was established in the 1930s under President Franklin D.Roosevelt.

Accepted Answer

A) True 
 B)False

Exam 13: Limiting Market Power: Regulation and Antitrust

Economies of scale imply: (i) a continuously falling AC curve; (ii) a larger output is more efficient than a smaller output.

By definition, an industry with high concentration also is highly competitive.

Deregulation of the airline and trucking industries was followed by the creation of many new firms.

Serious concern for deregulation began to appear in Congress in the 1970s.

Economists cite some beneficial effects of price discrimination.What are these benefits and how do the antitrust laws treat price discrimination?

Bigness, or large firms, may benefit consumers in which of the following ways?

Which of the following acts prohibited predatory pricing?

The share of industry output sold by the top four steel producers in the country are 19%, 15%, 12%, and 9% respectively.The four-firm concentration ratio for the steel industry is

The Justice Department and the Federal Trade Commission are likely to oppose mergers

Microsoft has been accused of violating an antitrust law pertaining to bundling.

The prices that are in the public's best interest will

Which of the following is a valid effect of monopoly power?

Beginning in the mid-1970s, Congress deregulated several industries including airlines and trucking.

Antitrust laws prohibit undesirable business practices by firms holding monopoly power.

Cross-subsidization implies that a loss from one product's sales will be made up by the profit from another product's sales.

A regulatory agency concerned with "universal service" must

Discuss some of the reasons why monopoly power is considered undesirable.

"Economies of scope" occur when

The four-firm concentration ratio for an industry is

The Federal Trade Commission was established in the 1930s under President Franklin D.Roosevelt.

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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