Question 1

Market power allows firms to raise prices significantly above the competitive level.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Regulation began in the United States in the 1950s.

Accepted Answer

A) True 
 B)False

Question 4

What is not a limitation of antitrust legislation?

Accepted Answer

A) The government seldom wins. 
B) Anticompetitive behavior may resemble vigorous competition. 
C) It prevents firms from challenging their rivals. 
D) The defendant may go bankrupt. 
A) The government seldom wins. 
B) Anticompetitive behavior may resemble vigorous competition. 
C) It prevents firms from challenging their rivals. 
D) The defendant may go bankrupt.

Question 5

If the four-firm concentration ratio in an industry increases, the industry

Accepted Answer

A) must have become more competitive. 
B) must have become a monopoly. 
C) must have become less competitive, although not necessarily a monopoly. 
D) may or may not have become less competitive. 
A) must have become more competitive. 
B) must have become a monopoly. 
C) must have become less competitive, although not necessarily a monopoly. 
D) may or may not have become less competitive.

Question 6

Compare the advantages and disadvantages of marginal and average cost pricing for natural monopolies.

Accepted Answer

Marginal cost is the correct cost to use

Question 7

The Herfindahl-Hirschman Index measures

Accepted Answer

A) concentration in the industry. 
B) industrial average output. 
C) economies of scale. 
D) consumer confidence. 
A) concentration in the industry. 
B) industrial average output. 
C) economies of scale. 
D) consumer confidence.

Question 8

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

Accepted Answer

The evidence is not clear-cut.While smal

Question 9

A regulatory agency that requires a firm to provide "universal service" must

Accepted Answer

A) prevent high profits in all markets. 
B) allow the firm to cross-subsidize. 
C) prevent cross-subsidization. 
D) guarantee marginal cost pricing. 
A) prevent high profits in all markets. 
B) allow the firm to cross-subsidize. 
C) prevent cross-subsidization. 
D) guarantee marginal cost pricing.

Question 10

Railroads have received significant attention from regulators because

Accepted Answer

A) railroads enjoy significant economies of scale. 
B) conditions in the railroad industry are conducive to destructive competition. 
C) regulators would like to ensure universal service to all potential railroad customers. 
D) railroads are vulnerable to predatory pricing. 
A) railroads enjoy significant economies of scale. 
B) conditions in the railroad industry are conducive to destructive competition. 
C) regulators would like to ensure universal service to all potential railroad customers. 
D) railroads are vulnerable to predatory pricing.

Question 11

If there are strong economies of scale and scope, then society

Accepted Answer

A) can benefit from regulation of a natural monopoly. 
B) can gain when more firms enter the market. 
C) can gain when regulators place a price floor on the market. 
D) should promote the expansion of federally run markets. 
A) can benefit from regulation of a natural monopoly. 
B) can gain when more firms enter the market. 
C) can gain when regulators place a price floor on the market. 
D) should promote the expansion of federally run markets.

Question 12

Distinguish between predatory pricing strategy and bundling strategy.

Accepted Answer

Predatory pricing is pricing that threat

Question 13

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 14

Which of the following acts prohibited false advertising?

Accepted Answer

A) Sherman Act 
B) Clayton Act 
C) Federal Trade Commission Act 
D) Celler-Kefauver Act 
A) Sherman Act 
B) Clayton Act 
C) Federal Trade Commission Act 
D) Celler-Kefauver Act

Question 15

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

Accepted Answer

Baumol and

Question 16

When firms have had to defend themselves against the charge that they have adopted unjustifiably low prices either to drive a competitor out of business or to prevent the entry of a rival, they have been accused of

Accepted Answer

A) creating a trust. 
B) conspiracy. 
C) predatory pricing. 
D) price discrimination. 
A) creating a trust. 
B) conspiracy. 
C) predatory pricing. 
D) price discrimination.

Question 17

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 18

The share of industry output sold by the top four steel producers in the country are 19 percent, 15 percent, 12 percent, and 9 percent, 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 19

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

Accepted Answer

A) True 
 B)False

Question 20

If a firm's average cost is declining, setting price equal to marginal cost will

Accepted Answer

A) maximize the firm's profits. 
B) minimize the firm's losses. 
C) guarantee that the firm will lose money. 
D) help the firm earn the opportunity costs of its resources. 
A) maximize the firm's profits. 
B) minimize the firm's losses. 
C) guarantee that the firm will lose money. 
D) help the firm earn the opportunity costs of its resources.

Exam 14: Limiting Market Power: Antitrust and Regulation

Market power allows firms to raise prices significantly above the competitive level.

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

Regulation began in the United States in the 1950s.

What is not a limitation of antitrust legislation?

If the four-firm concentration ratio in an industry increases, the industry

Compare the advantages and disadvantages of marginal and average cost pricing for natural monopolies.

The Herfindahl-Hirschman Index measures

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

A regulatory agency that requires a firm to provide "universal service" must

Railroads have received significant attention from regulators because

If there are strong economies of scale and scope, then society

Distinguish between predatory pricing strategy and bundling strategy.

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

Which of the following acts prohibited false advertising?

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

When firms have had to defend themselves against the charge that they have adopted unjustifiably low prices either to drive a competitor out of business or to prevent the entry of a rival, they have been accused of

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

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

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

If a firm's average cost is declining, setting price equal to marginal cost will

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

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