Question 1

Firms violating antitrust laws are likely to be sued by the federal government, but not by rival firms.

Accepted Answer

A) True 
 B)False

Question 2

Universal service may require making a service available in small communities where the limited scale of operations may make costs extremely high.

Accepted Answer

A) True 
 B)False

Question 3

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 4

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 5

Regulating firms so that they always receive a guaranteed profit rate will lead to greatest efficiency.

Accepted Answer

A) True 
 B)False

Question 6

Economies of scale and scope encourage free competition.

Accepted Answer

A) True 
 B)False

Question 7

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 8

The antitrust laws are enforced by government agencies such as the Federal Trade Commission and the Department of Justice.

Accepted Answer

A) True 
 B)False

Question 9

Microsoft is accused of which anticompetitive 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 10

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 11

A home appliances supplier offers substantial discounts to customers if they buy several of the firm's products.When bought together, these items cost considerably less than the sum of the prices of the items if they were bought separately.Which pricing arrangement is being discussed here?

Accepted Answer

A) Price dealing 
B) Tacit collusion 
C) Bundling 
D) Skimming 
A) Price dealing 
B) Tacit collusion 
C) Bundling 
D) Skimming

Question 12

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 13

Following deregulation in the airline industry,

Accepted Answer

A) small carriers have gone out of business but large carriers have not. 
B) large carriers have gone out of business but small carriers have not. 
C) both large carriers and small carriers have gone out of business. 
D) neither large carriers nor small carriers have gone out of business. 
A) small carriers have gone out of business but large carriers have not. 
B) large carriers have gone out of business but small carriers have not. 
C) both large carriers and small carriers have gone out of business. 
D) neither large carriers nor small carriers have gone out of business.

Question 14

The Clayton Act prohibits "all contracts, combinations and conspiracies in restraint of trade."

Accepted Answer

A) True 
 B)False

Question 15

Regulatory agencies always protect consumers by forcing regulated firms to sell at the lowest possible price.

Accepted Answer

A) True 
 B)False

Question 16

Major firms charged with predatory pricing defend by saying that their prices are low because of superior efficiency.

Accepted Answer

A) True 
 B)False

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

What does the Herfindahl-Hirschman Index value near zero imply about the market?

Accepted Answer

A) Monopoly 
B) Perfect competition 
C) Monopolistic competition 
D) Oligopoly 
A) Monopoly 
B) Perfect competition 
C) Monopolistic competition 
D) Oligopoly

Question 19

"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 20

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.

Exam 14: Limiting Market Power: Antitrust and Regulation

Firms violating antitrust laws are likely to be sued by the federal government, but not by rival firms.

Universal service may require making a service available in small communities where the limited scale of operations may make costs extremely high.

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

Regulating an industry to remove all economic profit

Regulating firms so that they always receive a guaranteed profit rate will lead to greatest efficiency.

Economies of scale and scope encourage free competition.

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

The antitrust laws are enforced by government agencies such as the Federal Trade Commission and the Department of Justice.

Microsoft is accused of which anticompetitive practice?

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

A home appliances supplier offers substantial discounts to customers if they buy several of the firm's products.When bought together, these items cost considerably less than the sum of the prices of the items if they were bought separately.Which pricing arrangement is being discussed here?

The four-firm concentration ratio for an industry is

Following deregulation in the airline industry,

The Clayton Act prohibits "all contracts, combinations and conspiracies in restraint of trade."

Regulatory agencies always protect consumers by forcing regulated firms to sell at the lowest possible price.

Major firms charged with predatory pricing defend by saying that their prices are low because of superior efficiency.

As an apparent result of airline deregulation,

What does the Herfindahl-Hirschman Index value near zero imply about the market?

"Economies of scope" occur when

Economies of scope are savings acquired by

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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