Question 1

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 2

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

Accepted Answer

A) True 
 B)False

Question 3

Briefly review the history of antitrust legislation in the United States.

Accepted Answer

The Sherman Act of 1890 prohibited all c

Question 4

For the two industries with market shares listed below, which of the following would be true? Table 14-1

Accepted Answer

A) The concentration ratio would be the same for both industries but the HHI would be higher for Industry A. 
B) The concentration ratio would be the same for both industries but the HHI would be higher for Industry B. 
C) The HHI would be the same for both industries but the concentration ratio would be higher for Industry B. 
D) Both the concentration ratio and the HHI would be the same for both industries. 
A) The concentration ratio would be the same for both industries but the HHI would be higher for Industry A. 
B) The concentration ratio would be the same for both industries but the HHI would be higher for Industry B. 
C) The HHI would be the same for both industries but the concentration ratio would be higher for Industry B. 
D) Both the concentration ratio and the HHI would be the same for both industries.

Question 5

From 1992 to 2012, many industries have increased in concentration.

Accepted Answer

A) True 
 B)False

Question 6

A regulatory agency that requires a firm to provide "universal service" must

Accepted Answer

A) prevent high profits in all markets. 
B) allow the firm to cross-subsidize. 
C) prevent cross-subsidization. 
D) guarantee marginal cost pricing. 
A) prevent high profits in all markets. 
B) allow the firm to cross-subsidize. 
C) prevent cross-subsidization. 
D) guarantee marginal cost pricing.

Question 7

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 8

Regulators often raise prices instead of lowering them. This is designed to

Accepted Answer

A) prevent the exit of competitors. 
B) protect the consumer from cheap products. 
C) ensure high-quality products. 
D) ensure workers are adequately paid. 
A) prevent the exit of competitors. 
B) protect the consumer from cheap products. 
C) ensure high-quality products. 
D) ensure workers are adequately paid.

Question 9

In many regulated industries, marginal cost will be

Accepted Answer

A) below average cost. 
B) above total cost. 
C) above marginal fixed cost. 
D) below incremental cost. 
A) below average cost. 
B) above total cost. 
C) above marginal fixed cost. 
D) below incremental cost.

Question 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

When firms have had to defend themselves against the charge that they have adopted unjustifiably low prices either to drive a competitor out of business or to prevent the entry of a rival, they have been accused of

Accepted Answer

A) creating a trust. 
B) conspiracy. 
C) predatory pricing. 
D) price discrimination. 
A) creating a trust. 
B) conspiracy. 
C) predatory pricing. 
D) price discrimination.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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 15

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 16

The Herfindahl-Hirschman Index measures

Accepted Answer

A) concentration in the industry. 
B) industrial average output. 
C) economies of scale. 
D) consumer confidence. 
A) concentration in the industry. 
B) industrial average output. 
C) economies of scale. 
D) consumer confidence.

Question 17

By definition, an industry with high concentration also is highly competitive.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 20

If a firm is a natural monopoly, society will benefit if it is broken into several small companies.

Accepted Answer

A) True 
 B)False

Exam 14: Limiting Market Power: Antitrust and Regulation

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

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

Briefly review the history of antitrust legislation in the United States.

For the two industries with market shares listed below, which of the following would be true? Table 14-1

From 1992 to 2012, many industries have increased in concentration.

A regulatory agency that requires a firm to provide "universal service" must

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

Regulators often raise prices instead of lowering them. This is designed to

In many regulated industries, marginal cost will be

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

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

When firms have had to defend themselves against the charge that they have adopted unjustifiably low prices either to drive a competitor out of business or to prevent the entry of a rival, they have been accused of

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

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

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 Herfindahl-Hirschman Index measures

By definition, an industry with high concentration also is highly competitive.

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

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?

If a firm is a natural monopoly, society will benefit if it is broken into several small companies.

What Is Economics

The Economy: 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

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

Filters

Unions typically deregulation because it generally makes pricing competitive.