Question 1

Which statement about market power is incorrect?

Accepted Answer

A) It can lead to price increases that exploit consumers. 
B) It can lead to resource misallocation. 
C) It can lead to inefficient production and the lack of innovation. 
D) Monopoly power can lead to decreases in producer surplus. 
A) It can lead to price increases that exploit consumers. 
B) It can lead to resource misallocation. 
C) It can lead to inefficient production and the lack of innovation. 
D) Monopoly power can lead to decreases in producer surplus.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

What is defined as the ability of a firm to earn high profits by raising and keeping the prices of its products substantially above the levels at which those products would be priced in competitive markets?

Accepted Answer

A) Economies of scope 
B) Tacit collusion 
C) Monopoly power 
D) Perfect competition 
A) Economies of scope 
B) Tacit collusion 
C) Monopoly power 
D) Perfect competition

Question 5

Under a tying contract,

Accepted Answer

A) the price a buyer must pay for a good is tied to the size of his or her purchase. 
B) a customer agrees as a condition of buying a good to purchase one or more additional goods from the same seller. 
C) a firm agrees to allow members of its competitors' boards of directors to sit on its board. 
D) a firm agrees to pay an intermediary for having arranged a business deal for the firm. 
A) the price a buyer must pay for a good is tied to the size of his or her purchase. 
B) a customer agrees as a condition of buying a good to purchase one or more additional goods from the same seller. 
C) a firm agrees to allow members of its competitors' boards of directors to sit on its board. 
D) a firm agrees to pay an intermediary for having arranged a business deal for the firm.

Question 6

While monopoly power can be abused, it can also be used beneficially.What are the major pros and cons of largeness in business?

Accepted Answer

The following pros of largenes

Question 7

Deregulation has dramatically decreased airline safety.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following would not lead to higher concentration in an industry?

Accepted Answer

A) A large number of firms have entered the market. 
B) Some firms have become technologically superior. 
C) Larger firms gain control of important resources, squeezing out smaller firms. 
D) Innovation increases plant size of some firms and lowered their average costs. 
A) A large number of firms have entered the market. 
B) Some firms have become technologically superior. 
C) Larger firms gain control of important resources, squeezing out smaller firms. 
D) Innovation increases plant size of some firms and lowered their average costs.

Question 9

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; 2,500 
B) 100; 9,000 
C) 50; 500 
D) 500; 1,300 
A) 1,000; 2,500 
B) 100; 9,000 
C) 50; 500 
D) 500; 1,300

Question 10

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 11

Looking at the record of concentration in the United States from 1992 to 2012, one finds concentration has

Accepted Answer

A) steadily increased. 
B) risen dramatically in the past 15 years. 
C) changed very little. 
D) fallen steadily except in wartime. 
A) steadily increased. 
B) risen dramatically in the past 15 years. 
C) changed very little. 
D) fallen steadily except in wartime.

Question 12

The Antitrust Division of the Department of Justice carefully scrutinizes mergers.Why?

Accepted Answer

Mergers can lead to an increase in marke

Question 13

Average cost pricing is permitted

Accepted Answer

A) when a service is produced by a natural monopoly. 
B) when few firms have the incentive to provide a service. 
C) in price-taking markets. 
D) when firms exhibit diseconomies of scale. 
A) when a service is produced by a natural monopoly. 
B) when few firms have the incentive to provide a service. 
C) in price-taking markets. 
D) when firms exhibit diseconomies of scale.

Question 14

When one firm can supply many goods through simultaneous production at higher savings,

Accepted Answer

A) it has achieved peak production. 
B) it has vertically integrated. 
C) it has horizontal integration. 
D) it has economies of scope. 
A) it has achieved peak production. 
B) it has vertically integrated. 
C) it has horizontal integration. 
D) it has economies of scope.

Question 15

Unions typically ____ deregulation because it generally makes pricing ____ competitive.

Accepted Answer

A) oppose; more 
B) oppose; less 
C) support; more 
D) support; less 
A) oppose; more 
B) oppose; less 
C) support; more 
D) support; less

Question 16

____ occur(s) when an X percent increase in input use raises output by more than X percent, so that the more the firm produces, the lower its per-unit costs become.

Accepted Answer

A) Economies of scope 
B) Scale economies 
C) Product differentiation 
D) Perfect competition 
A) Economies of scope 
B) Scale economies 
C) Product differentiation 
D) Perfect competition

Question 17

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 18

Regulated industries that exhibit economies of scale and marginal cost pricing will lead to losses.

Accepted Answer

A) True 
 B)False

Question 19

In most industries, deregulation has led to lower prices.

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 14: Limiting Market Power: Antitrust and Regulation

Which statement about market power is incorrect?

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

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

What is defined as the ability of a firm to earn high profits by raising and keeping the prices of its products substantially above the levels at which those products would be priced in competitive markets?

Under a tying contract,

While monopoly power can be abused, it can also be used beneficially.What are the major pros and cons of largeness in business?

Deregulation has dramatically decreased airline safety.

Which of the following would not lead to higher concentration in an industry?

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

The federal government is most likely to oppose

Looking at the record of concentration in the United States from 1992 to 2012, one finds concentration has

The Antitrust Division of the Department of Justice carefully scrutinizes mergers.Why?

Average cost pricing is permitted

When one firm can supply many goods through simultaneous production at higher savings,

Unions typically ____ deregulation because it generally makes pricing ____ competitive.

____ occur(s) when an X percent increase in input use raises output by more than X percent, so that the more the firm produces, the lower its per-unit costs become.

The Department of Justice generally

Regulated industries that exhibit economies of scale and marginal cost pricing will lead to losses.

In most industries, deregulation has led to lower prices.

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

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

Filters

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

Unions typically deregulation because it generally makes pricing competitive.