Question 1

A possible advantage of a horizontal merger for the economy is that

Accepted Answer

A) the merging firms could avoid losses. 
B) the merged firm might reap economies of scale which could translate into lower prices. 
C) the degree of competition in the industry will be intensified. 
D) the government stands to collect more corporate income tax revenue. 
A) the merging firms could avoid losses. 
B) the merged firm might reap economies of scale which could translate into lower prices. 
C) the degree of competition in the industry will be intensified. 
D) the government stands to collect more corporate income tax revenue.

Question 2

A patent

Accepted Answer

A) grants the creator of a book, film, or piece of music the exclusive right to use the creation for 20 years. 
B) grants the creator of a book, film, or piece of music the exclusive right to use the creation during the creator's lifetime. 
C) gives a firm the exclusive right to a new product for 20 years from the date the product is invented. 
D) gives the firm the exclusive right to a new product during the product inventor's lifetime. 
A) grants the creator of a book, film, or piece of music the exclusive right to use the creation for 20 years. 
B) grants the creator of a book, film, or piece of music the exclusive right to use the creation during the creator's lifetime. 
C) gives a firm the exclusive right to a new product for 20 years from the date the product is invented. 
D) gives the firm the exclusive right to a new product during the product inventor's lifetime.

Question 3

Figure 10-11
   
In 2011, Verizon was granted permission to enter the market for cable TV in Upstate New York, ending the virtual monopoly that Time Warner Cable had in most local communities in the region.Figure 10-11 shows the cable television market in Upstate New York.
-Refer to Figure 10-11.Suppose the local government imposes a $2.50 per month tax on cable companies.What happens to the price charged by the cable company following the imposition of this tax?

Accepted Answer

A) The price rises from PM to (PM + $2.50). 
B) The price rises from PM but it increases by an amount less than $2.50. 
C) The price rises from PM but it increases by an amount greater than $2.50 to reflect the monopoly's markup. 
D) The price remains at PM. 
A) The price rises from PM to (PM + $2.50). 
B) The price rises from PM but it increases by an amount less than $2.50. 
C) The price rises from PM but it increases by an amount greater than $2.50 to reflect the monopoly's markup. 
D) The price remains at PM.

Question 4

Figure 10-11
   
In 2011, Verizon was granted permission to enter the market for cable TV in Upstate New York, ending the virtual monopoly that Time Warner Cable had in most local communities in the region.Figure 10-11 shows the cable television market in Upstate New York.
-Refer to Figure 10-11.Following the entry of Verizon,the subscription price falls from PM to PC.What is the increase in consumer surplus as a result of this change?

Accepted Answer

A) the area A + B + C 
B) the area B + C 
C) the area D + F 
D) the area B + C + D 
A) the area A + B + C 
B) the area B + C 
C) the area D + F 
D) the area B + C + D

Question 5

The Clayton Act is an antitrust law that was passed to

Accepted Answer

A) outlaw monopolization. 
B) address loopholes in the Sherman Act. 
C) prohibit charging buyers different prices if the result would reduce competition. 
D) toughen restrictions on mergers by prohibiting mergers that reduce competition. 
A) outlaw monopolization. 
B) address loopholes in the Sherman Act. 
C) prohibit charging buyers different prices if the result would reduce competition. 
D) toughen restrictions on mergers by prohibiting mergers that reduce competition.

Question 6

Baxter International,a manufacturer of hospital supplies,acquired American Hospital Supply,a distributor of hospital supplies.This is an example of

Accepted Answer

A) a conglomerate merger. 
B) a horizontal merger. 
C) a vertical merger. 
D) a two-dimensional merger. 
A) a conglomerate merger. 
B) a horizontal merger. 
C) a vertical merger. 
D) a two-dimensional merger.

Question 7

Figure 10-15
   
Figure 10-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 10-15.What is the economically efficient output level and what is the price at that level?

Accepted Answer

A)  Q₄, P₁ 
B) Q₃, P₂ 
C) Q₂, P₂ 
D) Q₂, P₃ 
A)  Q₄, P₁ 
B) Q₃, P₂ 
C) Q₂, P₂ 
D) Q₂, P₃

Question 8

A merger between the Ford Motor Company and General Motors would be an example of a

Accepted Answer

A) vertical merger. 
B) horizontal merger. 
C) conglomerate merger. 
D) trust. 
A) vertical merger. 
B) horizontal merger. 
C) conglomerate merger. 
D) trust.

Question 9

Beginning in 1965,the head of the Antitrust Division of the U.S.Department of Justice began to change antitrust policy.How did antitrust policy change?

Accepted Answer

A) For the first time horizontal mergers were allowed-with government approval-and vertical mergers were allowed without need for approval from the government. 
B) For the first time concentration ratios were used to evaluate the degree of competition in the industries of firms that proposed mergers. 
C) The Division began to systematically consider the economic consequences of proposed mergers. 
D) Proposed mergers no longer needed the approval of the Federal Trade Commission or the court system. 
A) For the first time horizontal mergers were allowed-with government approval-and vertical mergers were allowed without need for approval from the government. 
B) For the first time concentration ratios were used to evaluate the degree of competition in the industries of firms that proposed mergers. 
C) The Division began to systematically consider the economic consequences of proposed mergers. 
D) Proposed mergers no longer needed the approval of the Federal Trade Commission or the court system.

Question 10

Figure 10-6
   
Figure 10-6 shows the cost and demand curves for a monopolist.
-Refer to Figure 10-6.The monopolist's total cost is

Accepted Answer

A) $1,116. 
B) $1,240. 
C) $1,660. 
D) $1,726.40. 
A) $1,116. 
B) $1,240. 
C) $1,660. 
D) $1,726.40.

Question 11

Figure 10-4
   
Figure 10-4 shows the demand and cost curves for a monopolist.
-Refer to Figure 10-4.What is the price charged for the profit-maximizing output level?

Accepted Answer

A) $13 
B) $21 
C) $27 
D) $34 
A) $13 
B) $21 
C) $27 
D) $34

Question 12

The term "trust" in antitrust refers to a board of trustees that has collusive control over different companies.

Accepted Answer

A) True 
 B)False

Question 13

Figure 10-9
   
Figure 10-9 shows the demand and cost curves for a monopolist.
-Refer to Figure 10-9.What is the difference between the monopoly output and the perfectly competitive output?

Accepted Answer

A) 140 units 
B) 240 units 
C) 340 units 
D) 560 units 
A) 140 units 
B) 240 units 
C) 340 units 
D) 560 units

Question 14

Consider two industries,industry Q and industry Z.In industry Q there are 10 companies,each with a market share of 10% of total sales.In industry Z,there are eight companies.One company has a 65% market share and each of the other seven firms has a market share of 5%.
a.Calculate the four-firm concentration ratio for each industry.
b.Calculate the Herfindahl-Hirschman Index (HHI)for each industry.
c.What do the values of the two concentration measures imply about the degree of market power in the two industries?

Accepted Answer

a. The concentration ratio in industry Q

Question 15

Figure 10-3
   
Figure 10-3 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 10-3.Suppose the monopolist represented in the diagram above produces positive output.What is the profit/loss per unit?

Accepted Answer

A) loss of $7 per unit 
B) profit of $30 per unit 
C) loss of $21 per unit 
D) profit of $14 per unit 
A) loss of $7 per unit 
B) profit of $30 per unit 
C) loss of $21 per unit 
D) profit of $14 per unit

Question 16

Which two factors make regulating mergers complicated?

Accepted Answer

A) First, firms may lobby government officials to influence their decision to approve the merger.Second, by the time the government officials reach a decision regarding the merger, the firms often decide not to merge. 
B) First, the time it takes to reach a decision to approve a merger is so long that the firms often have new owners and mangers.Second, by law, government officials are not allowed to consider the impact of foreign trade (exports and imports)on the degree of competition in the markets of the merged firms. 
C) First, the Federal Trade Commission and the Antitrust Division of the U.S.Department of Justice must both approve mergers.Second, the concentration ratios that are used to evaluate the degree of competition the merged firms face are flawed. 
D) First, it is not always clear what market firms are in.Second, the newly merged firm might be more efficient than the merging firms were individually. 
A) First, firms may lobby government officials to influence their decision to approve the merger.Second, by the time the government officials reach a decision regarding the merger, the firms often decide not to merge. 
B) First, the time it takes to reach a decision to approve a merger is so long that the firms often have new owners and mangers.Second, by law, government officials are not allowed to consider the impact of foreign trade (exports and imports)on the degree of competition in the markets of the merged firms. 
C) First, the Federal Trade Commission and the Antitrust Division of the U.S.Department of Justice must both approve mergers.Second, the concentration ratios that are used to evaluate the degree of competition the merged firms face are flawed. 
D) First, it is not always clear what market firms are in.Second, the newly merged firm might be more efficient than the merging firms were individually.

Question 17

The demand curve for the monopoly's product is

Accepted Answer

A) the market demand for the product. 
B) more elastic than the market demand for the product. 
C) more inelastic than the market demand for the product. 
D) undefined. 
A) the market demand for the product. 
B) more elastic than the market demand for the product. 
C) more inelastic than the market demand for the product. 
D) undefined.

Question 18

Why are laws aimed at regulating monopolies called "antitrust" laws?

Accepted Answer

A) The rise of large firms (e.g., Standard Oil)in the late 1800s in the United States caused consumers to lose trust in private business. 
B) "Trust" was a word in Old English that meant monopoly in the Middle Ages.Therefore, "antitrust" is a term that means "against monopoly." 
C) In the late 1800s, firms in several industries formed trusts; the firms were independent but gave voting control to a board of trustees.Antitrust laws were passed to regulate these trusts. 
D) In the late 1800s, firms in several industries formed trusts; they were called "trusts" because when corporate officials were questioned about their business they would clam that business was good for the country and that they should trusted. 
A) The rise of large firms (e.g., Standard Oil)in the late 1800s in the United States caused consumers to lose trust in private business. 
B) "Trust" was a word in Old English that meant monopoly in the Middle Ages.Therefore, "antitrust" is a term that means "against monopoly." 
C) In the late 1800s, firms in several industries formed trusts; the firms were independent but gave voting control to a board of trustees.Antitrust laws were passed to regulate these trusts. 
D) In the late 1800s, firms in several industries formed trusts; they were called "trusts" because when corporate officials were questioned about their business they would clam that business was good for the country and that they should trusted.

Question 19

Table 10-1
 $$\begin{array} { | c | c | c | } 
\hline \text { Price per Unit } & \begin{array} { c } 
\text { Quantity } \
\text { Demanded } \
\text { (units) }
\end{array} & \begin{array} { c } 
\text { Total Cost of } \
\text { Production } \
\text { (dollars) }
\end{array} \
\hline \$ 85 & 10 & \$ 530 \
\hline 80 & 11 & 540 \
\hline 75 & 12 & 550 \
\hline 70 & 13 & 560 \
\hline 65 & 14 & 575 \
\hline 60 & 15 & 595 \
\hline 55 & 16 & 625 \
\hline
\end{array}$$ 
A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 10-1.
-Refer to Table 10-1.What is the firm's profit-maximizing output and what is the price charged to sell this output?

Accepted Answer

A) P = $85; Q = 10 
B) P = $80; Q = 11 
C) P = $70; Q = 13 
D) P = $65; Q = 14 
A) P = $85; Q = 10 
B) P = $80; Q = 11 
C) P = $70; Q = 13 
D) P = $65; Q = 14

Question 20

Explain why market power leads to a deadweight loss.Is the total deadweight loss from market power in the United States large or small?

Accepted Answer

Market power allows a firm to set its pr

A possible advantage of a horizontal merger for the economy is that

A patent

The Clayton Act is an antitrust law that was passed to

Baxter International,a manufacturer of hospital supplies,acquired American Hospital Supply,a distributor of hospital supplies.This is an example of

Figure 10-15 Figure 10-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 10-15.What is the economically efficient output level and what is the price at that level?

A merger between the Ford Motor Company and General Motors would be an example of a

Beginning in 1965,the head of the Antitrust Division of the U.S.Department of Justice began to change antitrust policy.How did antitrust policy change?

Figure 10-6 Figure 10-6 shows the cost and demand curves for a monopolist. -Refer to Figure 10-6.The monopolist's total cost is

Figure 10-4 Figure 10-4 shows the demand and cost curves for a monopolist. -Refer to Figure 10-4.What is the price charged for the profit-maximizing output level?

The term "trust" in antitrust refers to a board of trustees that has collusive control over different companies.

Figure 10-9 Figure 10-9 shows the demand and cost curves for a monopolist. -Refer to Figure 10-9.What is the difference between the monopoly output and the perfectly competitive output?

Figure 10-3 Figure 10-3 above shows the demand and cost curves facing a monopolist. -Refer to Figure 10-3.Suppose the monopolist represented in the diagram above produces positive output.What is the profit/loss per unit?

Which two factors make regulating mergers complicated?

The demand curve for the monopoly's product is

Why are laws aimed at regulating monopolies called "antitrust" laws?

Explain why market power leads to a deadweight loss.Is the total deadweight loss from market power in the United States large or small?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 10: Monopoly and Antitrust Policy

A possible advantage of a horizontal merger for the economy is that

A patent

The Clayton Act is an antitrust law that was passed to

Baxter International,a manufacturer of hospital supplies,acquired American Hospital Supply,a distributor of hospital supplies.This is an example of

Figure 10-15 Figure 10-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 10-15.What is the economically efficient output level and what is the price at that level?

A merger between the Ford Motor Company and General Motors would be an example of a

Beginning in 1965,the head of the Antitrust Division of the U.S.Department of Justice began to change antitrust policy.How did antitrust policy change?

Figure 10-6 Figure 10-6 shows the cost and demand curves for a monopolist. -Refer to Figure 10-6.The monopolist's total cost is

Figure 10-4 Figure 10-4 shows the demand and cost curves for a monopolist. -Refer to Figure 10-4.What is the price charged for the profit-maximizing output level?

The term "trust" in antitrust refers to a board of trustees that has collusive control over different companies.

Figure 10-9 Figure 10-9 shows the demand and cost curves for a monopolist. -Refer to Figure 10-9.What is the difference between the monopoly output and the perfectly competitive output?

Figure 10-3 Figure 10-3 above shows the demand and cost curves facing a monopolist. -Refer to Figure 10-3.Suppose the monopolist represented in the diagram above produces positive output.What is the profit/loss per unit?

Which two factors make regulating mergers complicated?

The demand curve for the monopoly's product is

Why are laws aimed at regulating monopolies called "antitrust" laws?

Explain why market power leads to a deadweight loss.Is the total deadweight loss from market power in the United States large or small?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters