Question 1

Private ownership of a monopoly cannot benefit society.

Accepted Answer

A) True 
 B)False

Question 2

Price-cap regulation is used in Australia as an incentive for regulated firms to lower costs.

Accepted Answer

A) True 
 B)False

Question 3

In New Zealand, the telephone lines (and cabinets) have been unbundled recently.Explain what this means in regards to tying and discuss why it is beneficial for social outcomes.

Accepted Answer

Bundling goods for sale was controversia

Question 4

Mergers always decrease welfare as there is a reduction in competition.

Accepted Answer

A) True 
 B)False

Question 5

Government policies to reduce the monopoly problem can create larger costs via political failure than the actual market failure costs.

Accepted Answer

A) True 
 B)False

Question 6

Reduced competition through merging of companies:

Accepted Answer

A) may raise social welfare if the benefit from the synergies exceeds the social cost of increased market power 
B) may raise social welfare if the cost from the synergies exceeds the benefit of increased market power 
C) will always benefit society as a whole 
D) will never benefit society as a whole 
A) may raise social welfare if the benefit from the synergies exceeds the social cost of increased market power 
B) may raise social welfare if the cost from the synergies exceeds the benefit of increased market power 
C) will always benefit society as a whole 
D) will never benefit society as a whole

Question 7

Although predatory pricing leads to short-run losses for the firm, it can be profitable in the long run.

Accepted Answer

A) True 
 B)False

Question 8

The business practice of tying:

Accepted Answer

A) is also referred to as bundling 
B) is also referred to as full-line forcing 
C) can increase business revenue 
D) all of the above are true 
A) is also referred to as bundling 
B) is also referred to as full-line forcing 
C) can increase business revenue 
D) all of the above are true

Question 9

Why do economists usually prefer private ownership to public ownership of natural monopolies?

Accepted Answer

Private owners have an incentive to mini

Question 10

Predatory pricing occurs when a firm sells its product at a price below the cost to drive out a competing firm.This reduces long run competition so the firm can then charge much higher prices.

Accepted Answer

A) True 
 B)False

Question 11

Regulated natural monopolies typically have rising average costs.

Accepted Answer

A) True 
 B)False

Question 12

Economists argue that transparent pricing will:

Accepted Answer

A) make it more difficult for a cartel to sustain high prices 
B) lead to vigorous competition among firms 
C) make it easier for firms to collude 
D) make it easier for producers to cheat on any cartel agreement 
A) make it more difficult for a cartel to sustain high prices 
B) lead to vigorous competition among firms 
C) make it easier for firms to collude 
D) make it easier for producers to cheat on any cartel agreement

Question 13

The practice of tying is used to:

Accepted Answer

A) enhance the enforcement of the Trade Practices Act 
B) package products to sell at a combined price closer to a buyer's total willingness to pay 
C) encourage the enforcement of collusive agreements 
D) control the retail price of a collection of related products 
A) enhance the enforcement of the Trade Practices Act 
B) package products to sell at a combined price closer to a buyer's total willingness to pay 
C) encourage the enforcement of collusive agreements 
D) control the retail price of a collection of related products

Question 14

It is easy for policymakers to determine whether some firms' decisions are anti-competitive or have a legitimate economic purpose.

Accepted Answer

A) True 
 B)False

Question 15

Under common law, courts will typically enforce contracts between competitors that reduce competition and increase prices.

Accepted Answer

A) True 
 B)False

Question 16

Suppose Peach Computers has entered into a resale price maintenance agreement with Computer Super Stores Inc.(CSS Inc.) but not with CompuMart.In this case:

Accepted Answer

A) CompuMart will benefit from customers who go to CSS Inc.for information about different computers. 
B) CSS Inc.will sell Peach computers at a lower price than CompuMart. 
C) the wholesale price of Peach computers will be different for CSS Inc.than it is for CompuMart 
D) Peach computers will never increase profits by having a resale price maintenance agreement with all retail outlets that sell its products. 
A) CompuMart will benefit from customers who go to CSS Inc.for information about different computers. 
B) CSS Inc.will sell Peach computers at a lower price than CompuMart. 
C) the wholesale price of Peach computers will be different for CSS Inc.than it is for CompuMart 
D) Peach computers will never increase profits by having a resale price maintenance agreement with all retail outlets that sell its products.

Question 17

Tying sales allow a firm to raise profit through perfect price discrimination.

Accepted Answer

A) True 
 B)False

Question 18

Economists agree that all competition laws lead to an increase in consumer welfare.

Accepted Answer

A) True 
 B)False

Question 19

Economists argue that there are no practical problems with marginal-cost pricing as a regulatory system.

Accepted Answer

A) True 
 B)False

Question 20

In 2004, the ACCC successfully prosecuted a number of petrol sellers in a Victorian town for collusion.The petrol sellers advertised their prices on boards outside their petrol stations.When one of the sellers wanted to raise petrol prices in the town, they would increase the price on their own board and then ring the other sellers to suggest that they 'go for a drive'.This is an example of the cost of:

Accepted Answer

A) predatory pricing 
B) transparent pricing 
C) resale price maintenance 
D) none of the above 
A) predatory pricing 
B) transparent pricing 
C) resale price maintenance 
D) none of the above

Exam 18: Competition Policy

Private ownership of a monopoly cannot benefit society.

Price-cap regulation is used in Australia as an incentive for regulated firms to lower costs.

In New Zealand, the telephone lines (and cabinets) have been unbundled recently.Explain what this means in regards to tying and discuss why it is beneficial for social outcomes.

Mergers always decrease welfare as there is a reduction in competition.

Government policies to reduce the monopoly problem can create larger costs via political failure than the actual market failure costs.

Reduced competition through merging of companies:

Although predatory pricing leads to short-run losses for the firm, it can be profitable in the long run.

The business practice of tying:

Why do economists usually prefer private ownership to public ownership of natural monopolies?

Predatory pricing occurs when a firm sells its product at a price below the cost to drive out a competing firm.This reduces long run competition so the firm can then charge much higher prices.

Regulated natural monopolies typically have rising average costs.

Economists argue that transparent pricing will:

The practice of tying is used to:

It is easy for policymakers to determine whether some firms' decisions are anti-competitive or have a legitimate economic purpose.

Under common law, courts will typically enforce contracts between competitors that reduce competition and increase prices.

Suppose Peach Computers has entered into a resale price maintenance agreement with Computer Super Stores Inc.(CSS Inc.) but not with CompuMart.In this case:

Tying sales allow a firm to raise profit through perfect price discrimination.

Economists agree that all competition laws lead to an increase in consumer welfare.

Economists argue that there are no practical problems with marginal-cost pricing as a regulatory system.

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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