Question 1

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 2

It is easy to discern the difference between vigorous competition and the exercise of monopoly power.

Accepted Answer

A) True 
 B)False

Question 3

The concentration ratio of an industry is a measure that captures the share of the industry's total output that is produced by its four largest firms.

Accepted Answer

A) True 
 B)False

Question 4

Critics of price regulation suggest that some firms

Accepted Answer

A) will lack the incentive to run their business efficiently. 
B) will underestimate their costs and lead to bankruptcy. 
C) will sue the federal government for damages. 
D) will set their price equal to marginal cost instead of average cost. 
A) will lack the incentive to run their business efficiently. 
B) will underestimate their costs and lead to bankruptcy. 
C) will sue the federal government for damages. 
D) will set their price equal to marginal cost instead of average cost.

Question 5

Define the following terms and explain their importance to the study of economics: 
a. Antitrust policy 
b. Economies of scale 
c. Economies of scope

Accepted Answer

a.Antitrust policy is designed to preven

Question 6

Regulation of industry is usually carried out by special government agencies that administer and interpret the law.

Accepted Answer

A) True 
 B)False

Question 7

Highly concentrated markets have a large number of price-taking firms.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

The government used the Herfindahl-Hirschman index to determine if a proposed merger will lead to excessive concentration.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Railroads have received significant attention from regulators because

Accepted Answer

A) railroads enjoy significant economies of scale. 
B) conditions in the railroad industry are conducive to destructive competition. 
C) regulators would like to ensure universal service to all potential railroad customers. 
D) railroads are vulnerable to predatory pricing. 
A) railroads enjoy significant economies of scale. 
B) conditions in the railroad industry are conducive to destructive competition. 
C) regulators would like to ensure universal service to all potential railroad customers. 
D) railroads are vulnerable to predatory pricing.

Question 12

If a firm's average cost is declining, setting price equal to marginal cost will

Accepted Answer

A) maximize the firm's profits. 
B) minimize the firm's losses. 
C) guarantee that the firm will lose money. 
D) help the firm earn the opportunity costs of its resources. 
A) maximize the firm's profits. 
B) minimize the firm's losses. 
C) guarantee that the firm will lose money. 
D) help the firm earn the opportunity costs of its resources.

Question 13

The Clayton Act prohibits "all contracts, combinations and conspiracies in restraint of trade."

Accepted Answer

A) True 
 B)False

Question 14

Antitrust laws prohibit undesirable business practices by firms holding monopoly power.

Accepted Answer

A) True 
 B)False

Question 15

Regulating an industry to remove all economic profit

Accepted Answer

A) removes all incentive for efficiency and responsiveness to consumer demand. 
B) removes distortions caused by cross subsidies. 
C) removes allocative inefficiency. 
D) increases incentives to be productively efficient. 
A) removes all incentive for efficiency and responsiveness to consumer demand. 
B) removes distortions caused by cross subsidies. 
C) removes allocative inefficiency. 
D) increases incentives to be productively efficient.

Question 16

Bottlenecks may force competitors to offer services within the same network.

Accepted Answer

A) True 
 B)False

Question 17

Microsoft is accused of which anticompetitive practice?

Accepted Answer

A) Interlocking directorates 
B) Illegal "bundling" of products 
C) Exclusive contracts 
D) Predatory pricing 
A) Interlocking directorates 
B) Illegal "bundling" of products 
C) Exclusive contracts 
D) Predatory pricing

Question 18

Changes in the rate charged by electric power companies are subject to government control because

Accepted Answer

A) the electric power companies are government enterprises. 
B) consumer ignorance makes it impossible to know what rates are fair. 
C) the electric power companies are firms that exhibit economies of scale. 
D) cutthroat competition would probably occur if the government did not intervene. 
A) the electric power companies are government enterprises. 
B) consumer ignorance makes it impossible to know what rates are fair. 
C) the electric power companies are firms that exhibit economies of scale. 
D) cutthroat competition would probably occur if the government did not intervene.

Question 19

Many regulated industries are not pure monopolies.

Accepted Answer

A) True 
 B)False

Question 20

Briefly and concisely define the following terms: 
a. Price discrimination 
b.Tying contracts 
c.Concentration ratio 
d.Market power

Accepted Answer

a.Price discrimination occurs when diffe

Exam 14: Limiting Market Power: Antitrust and Regulation

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

It is easy to discern the difference between vigorous competition and the exercise of monopoly power.

The concentration ratio of an industry is a measure that captures the share of the industry's total output that is produced by its four largest firms.

Critics of price regulation suggest that some firms

Define the following terms and explain their importance to the study of economics: a. Antitrust policy b. Economies of scale c. Economies of scope

Regulation of industry is usually carried out by special government agencies that administer and interpret the law.

Highly concentrated markets have a large number of price-taking firms.

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

The government used the Herfindahl-Hirschman index to determine if a proposed merger will lead to excessive concentration.

Average cost pricing is permitted

Railroads have received significant attention from regulators because

If a firm's average cost is declining, setting price equal to marginal cost will

The Clayton Act prohibits "all contracts, combinations and conspiracies in restraint of trade."

Antitrust laws prohibit undesirable business practices by firms holding monopoly power.

Regulating an industry to remove all economic profit

Bottlenecks may force competitors to offer services within the same network.

Microsoft is accused of which anticompetitive practice?

Changes in the rate charged by electric power companies are subject to government control because

Many regulated industries are not pure monopolies.

Briefly and concisely define the following terms: a. Price discrimination b.Tying contracts c.Concentration ratio d.Market power

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

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