Question 1

Airline deregulation led to the demise of many smaller airlines but large carriers were not materially affected.

Accepted Answer

A) True 
 B)False

Question 2

The goal of all regulation is the creation of perfectly competitive markets.

Accepted Answer

A) True 
 B)False

Question 3

The Department of Justice and the Federal Trade Commission enforce antitrust laws.

Accepted Answer

A) True 
 B)False

Question 4

Airline deregulation has led to (i)lower prices or (ii)a deterioration of service to isolated communities.

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 5

All large firms have monopoly power.

Accepted Answer

A) True 
 B)False

Question 6

Which is not considered an "anticompetitive practice"?

Accepted Answer

A) Firms threaten to destroy competitors through innovation. 
B) A firm forces competitors to compete on prices. 
C) A firm prevents the entry of new rivals. 
D) Firms share intellectual property that may be helpful for research and development. 
A) Firms threaten to destroy competitors through innovation. 
B) A firm forces competitors to compete on prices. 
C) A firm prevents the entry of new rivals. 
D) Firms share intellectual property that may be helpful for research and development.

Question 7

Economists cite some beneficial effects of price discrimination. What are these benefits and how do the antitrust laws treat price discrimination?

Accepted Answer

Benefits include the ability to sell a p

Question 8

What is not true if a firm exhibits decreasing average cost as quantity increases?

Accepted Answer

A) Marginal cost must be below average cost. 
B) Firms would go bankrupt if all prices were equal to marginal cost. 
C) More customers can be served at lower average costs per unit. 
D) This is called diseconomies of scale. 
A) Marginal cost must be below average cost. 
B) Firms would go bankrupt if all prices were equal to marginal cost. 
C) More customers can be served at lower average costs per unit. 
D) This is called diseconomies of scale.

Question 9

Powers of many regulatory agencies are designed to protect public health and safety.

Accepted Answer

A) True 
 B)False

Question 10

Deregulation of the airline and trucking industries was followed by the creation of many new firms.

Accepted Answer

A) True 
 B)False

Question 11

Bigness, or large firms, may benefit consumers in which of the following ways?

Accepted Answer

A) Larger firms usually charge lower prices than smaller firms. 
B) Larger firms with monopoly power definitely have greater incentive to be efficient and innovative. 
C) Larger firms may take advantage of economies of scale and scope. 
D) Larger firms are more responsive to consumers' desires. 
A) Larger firms usually charge lower prices than smaller firms. 
B) Larger firms with monopoly power definitely have greater incentive to be efficient and innovative. 
C) Larger firms may take advantage of economies of scale and scope. 
D) Larger firms are more responsive to consumers' desires.

Question 12

Setting price equal to marginal cost in a natural monopoly will lead to

Accepted Answer

A) excess profits for the firm. 
B) losses for the firm. 
C) zero profits for the firm. 
D) One cannot tell without further information. 
A) excess profits for the firm. 
B) losses for the firm. 
C) zero profits for the firm. 
D) One cannot tell without further information.

Question 13

If there are strong economies of scale and scope, then society

Accepted Answer

A) can benefit from regulation of a natural monopoly. 
B) can gain when more firms enter the market. 
C) can gain when regulators place a price floor on the market. 
D) should promote the expansion of federally run markets. 
A) can benefit from regulation of a natural monopoly. 
B) can gain when more firms enter the market. 
C) can gain when regulators place a price floor on the market. 
D) should promote the expansion of federally run markets.

Question 14

One economically valid approach to regulation is simply to break all large firms into many smaller ones.

Accepted Answer

A) True 
 B)False

Question 15

The concept of economies of scope describes the savings acquired from simultaneous production of different products.

Accepted Answer

A) True 
 B)False

Question 16

Policies that preclude the deliberate creation of monopoly and undesirable practices are called

Accepted Answer

A) antitrust policies. 
B) antimonopoly policies. 
C) anticompetitive policies. 
D) socialism. 
A) antitrust policies. 
B) antimonopoly policies. 
C) anticompetitive policies. 
D) socialism.

Question 17

Universal service means that one company provides service to all consumers, everywhere.

Accepted Answer

A) True 
 B)False

Question 18

Economists ordinarily favor setting price equal to marginal cost when this option is feasible.

Accepted Answer

A) True 
 B)False

Question 19

Monopoly rights give inventors and entrepreneurs incentives to innovate and create new products and services.

Accepted Answer

A) True 
 B)False

Question 20

Many industries are regulated in the United States, from railroads and electric utilities to cable TV.

Accepted Answer

A) True 
 B)False

Exam 14: Limiting Market Power: Antitrust and Regulation

Airline deregulation led to the demise of many smaller airlines but large carriers were not materially affected.

The goal of all regulation is the creation of perfectly competitive markets.

The Department of Justice and the Federal Trade Commission enforce antitrust laws.

Airline deregulation has led to (i)lower prices or (ii)a deterioration of service to isolated communities.

All large firms have monopoly power.

Which is not considered an "anticompetitive practice"?

Economists cite some beneficial effects of price discrimination. What are these benefits and how do the antitrust laws treat price discrimination?

What is not true if a firm exhibits decreasing average cost as quantity increases?

Powers of many regulatory agencies are designed to protect public health and safety.

Deregulation of the airline and trucking industries was followed by the creation of many new firms.

Bigness, or large firms, may benefit consumers in which of the following ways?

Setting price equal to marginal cost in a natural monopoly will lead to

If there are strong economies of scale and scope, then society

One economically valid approach to regulation is simply to break all large firms into many smaller ones.

The concept of economies of scope describes the savings acquired from simultaneous production of different products.

Policies that preclude the deliberate creation of monopoly and undesirable practices are called

Universal service means that one company provides service to all consumers, everywhere.

Economists ordinarily favor setting price equal to marginal cost when this option is feasible.

Monopoly rights give inventors and entrepreneurs incentives to innovate and create new products and services.

Many industries are regulated in the United States, from railroads and electric utilities to cable TV.

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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