Exam 14: Limiting Market Power: Antitrust and Regulation

What would the Herfindahl-Hirschman Index equal for an industry consisting of six firms with market shares of 5 percent, 10 percent, 15 percent, 20 percent, 25 percent, and 25 percent?

Which of the following acts prohibited false advertising?

If the four-firm concentration ratio in an industry increases, the industry

Major firms charged with predatory pricing defend by saying that their prices are low because of superior efficiency.

Which of the following is a valid effect of monopoly power?

Before the breakup of AT&T several years ago, profits on long-distance calls offset losses on basic residential service. This practice is known as

Economists believe mergers can sometimes achieve greater efficiency than two companies that do not merge.

What does the Herfindahl-Hirschman Index value near 10,000 imply about the market?

Archer Daniels Midland (ADM)was convicted for this anticompetitive practice in the lysine market.

Monopoly pricing reduces consumer surplus.

The declared purpose of antitrust policy is to promote competition, yet some would say it actually may prevent competition. Explain the two sides of the debate.

Deregulation has dramatically decreased airline safety.

An exclusive supply contract is a contract between a firm and its input suppliers that requires the suppliers to sell only to that firm, not anyone else.

Economies of scale and scope encourage free competition.

"Economies of scope" occur when