Question 1

Resale price maintenance prevents retailers from competing on price.

Accepted Answer

A) True 
 B)False

Question 2

In the Microsoft antitrust lawsuit, Microsoft's lawyers argued that selling an internet browser and operating system together is no different to:

Accepted Answer

A) selling a car with a radio 
B) selling a camera with a flash 
C) selling a car with an air conditioner 
D) all of the above 
A) selling a car with a radio 
B) selling a camera with a flash 
C) selling a car with an air conditioner 
D) all of the above

Question 3

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly:

Accepted Answer

A) has no incentive to exit the industry 
B) will experience a price below average total cost 
C) may rely on a government subsidy to remain in business 
D) both B and C are true 
A) has no incentive to exit the industry 
B) will experience a price below average total cost 
C) may rely on a government subsidy to remain in business 
D) both B and C are true

Question 4

An important benefit of private ownership of a monopoly is that a private monopoly has more incentive to:

Accepted Answer

A) bargain for much lower wages for its workers 
B) charge a price that is consistent with that of a benevolent social planner 
C) lower its costs so that it can earn more profit 
D) price its good according to the intersection of marginal cost and average revenue 
A) bargain for much lower wages for its workers 
B) charge a price that is consistent with that of a benevolent social planner 
C) lower its costs so that it can earn more profit 
D) price its good according to the intersection of marginal cost and average revenue

Question 5

Privatisation of a government-owned asset could reduce future earnings to the country.

Accepted Answer

A) True 
 B)False

Question 6

The main rationale for making tying illegal is that:

Accepted Answer

A) it allows firms to form collusive arrangements 
B) it increases the availability of movies to the public 
C) collusive agreements are not conducive to cooperative outcomes 
D) it allows firms to expand their market power 
A) it allows firms to form collusive arrangements 
B) it increases the availability of movies to the public 
C) collusive agreements are not conducive to cooperative outcomes 
D) it allows firms to expand their market power

Question 7

Government policies that aim to improve the efficiency of oligopolistic and monopoly markets are called:

Accepted Answer

A) competition policy 
B) welfare policy 
C) state government policy 
D) equal opportunity policy 
A) competition policy 
B) welfare policy 
C) state government policy 
D) equal opportunity policy

Question 8

Why might economists prefer private ownership of monopolies over public ownership of monopolies?

Accepted Answer

The private monopolist is governed by th

Question 9

Re-sale price maintenance is a profit-maximising strategy used by wholesalers to restrict competition amongst retailers.

Accepted Answer

A) True 
 B)False

Question 10

Economists generally agree that transparent pricing increases incentives for cartel members to cheat.

Accepted Answer

A) True 
 B)False

Question 11

In many countries, the government chooses to 'internalise' the monopoly by owning monopoly providers of goods and services.(In some cases these firms are 'nationalised' and the government actually buys or confiscates firms that operate in monopoly markets.) What would be the advantages and disadvantages of such an approach to ensuring that the 'best interest of society' is promoted in these markets? Carefully explain your answer.

Accepted Answer

As long as the government 'owner' pursue

Question 12

Explain the practice of tying and discuss why it is controversial.

Accepted Answer

Tying is the practice of bundling goods

Question 13

When regulating a natural monopoly, the government should make the firm charge its marginal cost of production.

Accepted Answer

A) True 
 B)False

Question 14

Corporatisation is the process of providing incentives to make them behave more like private owners.

Accepted Answer

A) True 
 B)False

Question 15

Competition laws may increase the cost of operating by restricting synergistic mergers.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is necessarily a problem with competition laws?

Accepted Answer

A) they promote competition 
B) they limit monopoly power 
C) they may target a business whose practices appear to be anti-competitive but in fact has legitimate purposes 
D) all of the above 
A) they promote competition 
B) they limit monopoly power 
C) they may target a business whose practices appear to be anti-competitive but in fact has legitimate purposes 
D) all of the above

Question 17

If a manufacturer does not exercise retail price maintenance, a free-rider problem may become evident among retailers and ultimately lead to:

Accepted Answer

A) transparent pricing 
B) tying 
C) lower profits for the manufacturer 
D) higher profits for the manufacturer 
A) transparent pricing 
B) tying 
C) lower profits for the manufacturer 
D) higher profits for the manufacturer

Question 18

The ACCC has denied, on several occasions, the merger between Air New Zealand and Qantas, yet has approved a merger between Qantas and Emirates.What differences are there between the market for flights from Australia to New Zealand and the market for flights between Australia and Europe (the primary routes on which Qantas and Emirates competed)?

Accepted Answer

The number of firms operating flights be

Question 19

Intervention by government into oligopoly markets can improve outcomes.

Accepted Answer

A) True 
 B)False

Question 20

The practice of requiring someone to buy two or more items together, rather than separately, is called:

Accepted Answer

A) product fixing 
B) tying 
C) free riding 
D) resale maintenance 
A) product fixing 
B) tying 
C) free riding 
D) resale maintenance

Exam 18: Competition Policy

Resale price maintenance prevents retailers from competing on price.

In the Microsoft antitrust lawsuit, Microsoft's lawyers argued that selling an internet browser and operating system together is no different to:

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly:

An important benefit of private ownership of a monopoly is that a private monopoly has more incentive to:

Privatisation of a government-owned asset could reduce future earnings to the country.

The main rationale for making tying illegal is that:

Government policies that aim to improve the efficiency of oligopolistic and monopoly markets are called:

Why might economists prefer private ownership of monopolies over public ownership of monopolies?

Re-sale price maintenance is a profit-maximising strategy used by wholesalers to restrict competition amongst retailers.

Economists generally agree that transparent pricing increases incentives for cartel members to cheat.

Explain the practice of tying and discuss why it is controversial.

When regulating a natural monopoly, the government should make the firm charge its marginal cost of production.

Corporatisation is the process of providing incentives to make them behave more like private owners.

Competition laws may increase the cost of operating by restricting synergistic mergers.

Which of the following is necessarily a problem with competition laws?

If a manufacturer does not exercise retail price maintenance, a free-rider problem may become evident among retailers and ultimately lead to:

Intervention by government into oligopoly markets can improve outcomes.

The practice of requiring someone to buy two or more items together, rather than separately, is called:

Ten Lessons From Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand and Government Policies

Consumers, Producers and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Business Strategy and Oligopoly

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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