Question 1

In regulated industries, the optimal regulation is to set price such that MC=P.

Accepted Answer

A) True 
 B)False

Question 2

When one firm can supply many goods through simultaneous production at higher savings,

Accepted Answer

A) it has achieved peak production. 
B) it has vertically integrated. 
C) it has horizontal integration. 
D) it has economies of scope. 
A) it has achieved peak production. 
B) it has vertically integrated. 
C) it has horizontal integration. 
D) it has economies of scope.

Question 3

Market power allows firms to raise prices significantly above the competitive level.

Accepted Answer

A) True 
 B)False

Question 4

Firms violating antitrust laws are likely to be sued by the federal government, but not by rival firms.

Accepted Answer

A) True 
 B)False

Question 5

Serious concern for deregulation began to appear in Congress in the 1970s.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Increasing concentration always means an industry has become effectively monopolized.

Accepted Answer

A) True 
 B)False

Question 8

The "universal service" argument often requires that some products be sold at a loss while other products be sold at profits higher than normal.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following events would increase the four-firm concentration ratio in a milk industry with six firms?

Accepted Answer

A) The two largest milk producers merge. 
B) The largest milk producer buys an ice cream-making plant. 
C) The largest milk producer lures customers away from the second largest producer. 
D) The four largest milk producers collusively fix prices. 
A) The two largest milk producers merge. 
B) The largest milk producer buys an ice cream-making plant. 
C) The largest milk producer lures customers away from the second largest producer. 
D) The four largest milk producers collusively fix prices.

Question 10

Selling at a price that is only slightly above the firm's cost of production is called predatory pricing .

Accepted Answer

A) True 
 B)False

Question 11

What is defined as the ability of a firm to earn high profits by raising and keeping the prices of its products substantially above the levels at which those products would be priced in competitive markets?

Accepted Answer

A) Economies of scope 
B) Tacit collusion 
C) Monopoly power 
D) Perfect competition 
A) Economies of scope 
B) Tacit collusion 
C) Monopoly power 
D) Perfect competition

Question 12

Economies of scale imply: (i)a continuously falling AC curve or (ii)a larger output is more efficient than a smaller output.

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

Economies of scale tend to create natural monopolies.

Accepted Answer

A) True 
 B)False

Question 14

What does the Herfindahl-Hirschman Index value near zero imply about the market?

Accepted Answer

A) Monopoly 
B) Perfect competition 
C) Monopolistic competition 
D) Oligopoly 
A) Monopoly 
B) Perfect competition 
C) Monopolistic competition 
D) Oligopoly

Question 15

Under a tying contract,

Accepted Answer

A) the price a buyer must pay for a good is tied to the size of his or her purchase. 
B) a customer agrees as a condition of buying a good to purchase one or more additional goods from the same seller. 
C) a firm agrees to allow members of its competitors' boards of directors to sit on its board. 
D) a firm agrees to pay an intermediary for having arranged a business deal for the firm. 
A) the price a buyer must pay for a good is tied to the size of his or her purchase. 
B) a customer agrees as a condition of buying a good to purchase one or more additional goods from the same seller. 
C) a firm agrees to allow members of its competitors' boards of directors to sit on its board. 
D) a firm agrees to pay an intermediary for having arranged a business deal for the firm.

Question 16

Which of the following acts prohibited predatory pricing?

Accepted Answer

A) Robinson-Patman Act 
B) Tunney Act 
C) Clayton Act 
D) Sherman Act 
A) Robinson-Patman Act 
B) Tunney Act 
C) Clayton Act 
D) Sherman Act

Question 17

As an apparent result of airline deregulation,

Accepted Answer

A) many small communities have been left without airline service. 
B) the wages and benefits of airline workers have been reduced. 
C) air fares have risen more quickly than they probably would have under continued regulation. 
D) small commuter airlines have almost vanished. 
A) many small communities have been left without airline service. 
B) the wages and benefits of airline workers have been reduced. 
C) air fares have risen more quickly than they probably would have under continued regulation. 
D) small commuter airlines have almost vanished.

Question 18

Which statement about market power is incorrect?

Accepted Answer

A) It can lead to price increases that exploit consumers. 
B) It can lead to resource misallocation. 
C) It can lead to inefficient production and the lack of innovation. 
D) Monopoly power can lead to decreases in producer surplus. 
A) It can lead to price increases that exploit consumers. 
B) It can lead to resource misallocation. 
C) It can lead to inefficient production and the lack of innovation. 
D) Monopoly power can lead to decreases in producer surplus.

Question 19

The Department of Justice generally

Accepted Answer

A) is not involved in merger policy. 
B) opposes horizontal mergers but permits conglomerate mergers. 
C) opposes only mergers that might reduce competition. 
D) opposes mergers whose apparent motive is obtaining economies of scale. 
A) is not involved in merger policy. 
B) opposes horizontal mergers but permits conglomerate mergers. 
C) opposes only mergers that might reduce competition. 
D) opposes mergers whose apparent motive is obtaining economies of scale.

Question 20

The four-firm concentration ratio for an industry is

Accepted Answer

A) the number of firms in the industry, divided by four. 
B) the share of industry output sold by the four largest firms in the industry. 
C) the percentage of total industry profits claimed by the four largest firms. 
D) the share of industry output sold by the fourth largest firm in the industry. 
A) the number of firms in the industry, divided by four. 
B) the share of industry output sold by the four largest firms in the industry. 
C) the percentage of total industry profits claimed by the four largest firms. 
D) the share of industry output sold by the fourth largest firm in the industry.

Exam 14: Limiting Market Power: Antitrust and Regulation

In regulated industries, the optimal regulation is to set price such that MC=P.

When one firm can supply many goods through simultaneous production at higher savings,

Market power allows firms to raise prices significantly above the competitive level.

Firms violating antitrust laws are likely to be sued by the federal government, but not by rival firms.

Serious concern for deregulation began to appear in Congress in the 1970s.

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

Increasing concentration always means an industry has become effectively monopolized.

The "universal service" argument often requires that some products be sold at a loss while other products be sold at profits higher than normal.

Which of the following events would increase the four-firm concentration ratio in a milk industry with six firms?

Selling at a price that is only slightly above the firm's cost of production is called predatory pricing .

What is defined as the ability of a firm to earn high profits by raising and keeping the prices of its products substantially above the levels at which those products would be priced in competitive markets?

Economies of scale imply: (i)a continuously falling AC curve or (ii)a larger output is more efficient than a smaller output.

Economies of scale tend to create natural monopolies.

What does the Herfindahl-Hirschman Index value near zero imply about the market?

Under a tying contract,

Which of the following acts prohibited predatory pricing?

As an apparent result of airline deregulation,

Which statement about market power is incorrect?

The Department of Justice generally

The four-firm concentration ratio for an industry is

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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