Question 1

All large firms have monopoly power.

Accepted Answer

A) True 
 B)False

Question 2

Monopoly pricing reduces consumer surplus.

Accepted Answer

A) True 
 B)False

Question 3

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

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 4

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

Accepted Answer

A) True 
 B)False

Question 5

Google's 88 percent market share of web search services makes it a monopolist.

Accepted Answer

A) True 
 B)False

Question 6

Firms with monopoly power tend to be more efficient than competitive firms.

Accepted Answer

A) True 
 B)False

Question 7

Firms that coordinate economic activities to reduce competition is considered illegal per se.

Accepted Answer

A) True 
 B)False

Question 8

Policies that preclude the deliberate creation of monopoly and undesirable practices are called

Accepted Answer

A) antitrust policies. 
B) antimonopoly policies. 
C) anticompetitive policies. 
D) socialism. 
A) antitrust policies. 
B) antimonopoly policies. 
C) anticompetitive policies. 
D) socialism.

Question 9

Service to consumers of deregulated products has generally not diminished.

Accepted Answer

A) True 
 B)False

Question 10

Increasing concentration always means an industry has become effectively monopolized.

Accepted Answer

A) True 
 B)False

Question 11

What would the Herfindahl-Hirschman Index equal for an industry consisting of 20 firms with each holding a 5 percent market share?

Accepted Answer

A) 20 
B) 100 
C) 500 
D) 2,500 
A) 20 
B) 100 
C) 500 
D) 2,500

Question 12

Deregulation of the airline and trucking industry has (i) resulted in considerable entry of new firms or (ii) has forced workers in these industries to make large concessions on wages and working conditions.

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 13

Unrestrained monopolies are criticized because they restrict output and reduce innovation.

Accepted Answer

A) True 
 B)False

Question 14

Why is regulation necessary to achieve "universal service"?

Accepted Answer

Universal service refers to making a ser

Question 15

Following mergers that raised the market shares of two airlines to 79 and 82 percent, respectively, of traffic in their hub cities, prices of service rose and the quantities of service fell, even though in most other markets, prices fell and quantities increased.The result suggests that

Accepted Answer

A) these markets were contestable. 
B) there was evidence of market power. 
C) oligopoly firms bought out their competitors. 
D) the market had no barriers to entry. 
A) these markets were contestable. 
B) there was evidence of market power. 
C) oligopoly firms bought out their competitors. 
D) the market had no barriers to entry.

Question 16

A firm that charges a very low price would be practicing predatory pricing if

Accepted Answer

A) the price allowed only a small profit. 
B) the price would only be profitable if it succeeded in driving a rival out of the market and prices increased afterward. 
C) the price allowed profits that were positive but below those earned by other firms. 
D) it only offered the low price to its rivals' customers. 
A) the price allowed only a small profit. 
B) the price would only be profitable if it succeeded in driving a rival out of the market and prices increased afterward. 
C) the price allowed profits that were positive but below those earned by other firms. 
D) it only offered the low price to its rivals' customers.

Question 17

Firm A's motive in filing an antitrust suit against Firm B may be to

Accepted Answer

A) create an expensive nuisance for Firm B. 
B) allow Firm A to acquire Firm B. 
C) gain an exclusive supply contract from Firm B. 
D) expose Firm B's cheating on their cartel agreement. 
A) create an expensive nuisance for Firm B. 
B) allow Firm A to acquire Firm B. 
C) gain an exclusive supply contract from Firm B. 
D) expose Firm B's cheating on their cartel agreement.

Question 18

Setting price equal to marginal cost in a natural monopoly will lead to

Accepted Answer

A) excess profits for the firm. 
B) losses for the firm. 
C) zero profits for the firm. 
D) One cannot tell without further information. 
A) excess profits for the firm. 
B) losses for the firm. 
C) zero profits for the firm. 
D) One cannot tell without further information.

Question 19

In a market with only one firm (a pure monopoly), the Herfindahl-Hirschman Index (HHI) would equal 10,000.

Accepted Answer

A) True 
 B)False

Question 20

Regulatory capture exists when

Accepted Answer

A) regulated firms form special interests and influence politicians who appoint regulators through campaign donations. 
B) regulated firms pay for favorable public media campaigns. 
C) the federal government successfully deregulates an industry. 
D) two or more firms merge to gain a majority market share. 
A) regulated firms form special interests and influence politicians who appoint regulators through campaign donations. 
B) regulated firms pay for favorable public media campaigns. 
C) the federal government successfully deregulates an industry. 
D) two or more firms merge to gain a majority market share.

Exam 14: Limiting Market Power: Antitrust and Regulation

All large firms have monopoly power.

Monopoly pricing reduces consumer surplus.

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

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

Google's 88 percent market share of web search services makes it a monopolist.

Firms with monopoly power tend to be more efficient than competitive firms.

Firms that coordinate economic activities to reduce competition is considered illegal per se.

Policies that preclude the deliberate creation of monopoly and undesirable practices are called

Service to consumers of deregulated products has generally not diminished.

Increasing concentration always means an industry has become effectively monopolized.

What would the Herfindahl-Hirschman Index equal for an industry consisting of 20 firms with each holding a 5 percent market share?

Deregulation of the airline and trucking industry has (i) resulted in considerable entry of new firms or (ii) has forced workers in these industries to make large concessions on wages and working conditions.

Unrestrained monopolies are criticized because they restrict output and reduce innovation.

Why is regulation necessary to achieve "universal service"?

Following mergers that raised the market shares of two airlines to 79 and 82 percent, respectively, of traffic in their hub cities, prices of service rose and the quantities of service fell, even though in most other markets, prices fell and quantities increased.The result suggests that

A firm that charges a very low price would be practicing predatory pricing if

Firm A's motive in filing an antitrust suit against Firm B may be to

Setting price equal to marginal cost in a natural monopoly will lead to

In a market with only one firm (a pure monopoly), the Herfindahl-Hirschman Index (HHI) would equal 10,000.

Regulatory capture exists when

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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