Question 1

A regulatory agency concerned with "universal service" must

Accepted Answer

A) prevent high profits in all markets. 
B) prevent entry in high-profit markets. 
C) prevent cross-subsidization. 
D) guarantee marginal cost pricing. 
A) prevent high profits in all markets. 
B) prevent entry in high-profit markets. 
C) prevent cross-subsidization. 
D) guarantee marginal cost pricing.

Question 2

Regulators often raise prices instead of lowering them.This is designed to

Accepted Answer

A) prevent the exit of competitors. 
B) protect the consumer from cheap products. 
C) ensure high-quality products. 
D) ensure workers are adequately paid. 
A) prevent the exit of competitors. 
B) protect the consumer from cheap products. 
C) ensure high-quality products. 
D) ensure workers are adequately paid.

Question 3

The main instrument of control of public monopolies is the regulatory agency.

Accepted Answer

A) True 
 B)False

Question 4

Service to consumers of deregulated products has generally not diminished.

Accepted Answer

A) True 
 B)False

Question 5

The Justice Department and the Federal Trade Commission are likely to oppose mergers

Accepted Answer

A) that seem likely to increase efficiency. 
B) that create a larger firm with economies of scale in a contestable market. 
C) which will help one of the merging firms out of financial difficulties. 
D) which threaten to reduce competition. 
A) that seem likely to increase efficiency. 
B) that create a larger firm with economies of scale in a contestable market. 
C) which will help one of the merging firms out of financial difficulties. 
D) which threaten to reduce competition.

Question 6

One possible solution to improve performance of regulated firms is which of the following?

Accepted Answer

A) Allow the firm to set its own rate of return. 
B) Allow higher rates of return to cover higher cost of better performance. 
C) Allow a higher rate of return for better performance. 
D) Set lower prices when efficiency improves. 
A) Allow the firm to set its own rate of return. 
B) Allow higher rates of return to cover higher cost of better performance. 
C) Allow a higher rate of return for better performance. 
D) Set lower prices when efficiency improves.

Question 7

In a market with only one firm (a pure monopoly), the Herfindahl-Hirschman Index (HHI) would equal 10,000.

Accepted Answer

A) True 
 B)False

Question 8

Increasing concentration always means an industry has become effectively monopolized.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

The federal government is most likely to oppose

Accepted Answer

A) the purchase of a firm in danger of bankruptcy by a successful firm. 
B) a merger between two firms in a perfectly competitive industry. 
C) the purchase of one oligopolist by another in an industry with contestable markets. 
D) a merger between two firms in a three-firm industry. 
A) the purchase of a firm in danger of bankruptcy by a successful firm. 
B) a merger between two firms in a perfectly competitive industry. 
C) the purchase of one oligopolist by another in an industry with contestable markets. 
D) a merger between two firms in a three-firm industry.

Question 11

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 12

Airline deregulation has led to: (i) lower prices; (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 13

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

Accepted Answer

A) True 
 B)False

Question 14

Economies of scale imply: (i) a continuously falling AC curve; (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 15

The share of industry output sold by the top four steel producers in the country are 19%, 15%, 12%, and 9% respectively.The four-firm concentration ratio for the steel industry is

Accepted Answer

A) 0.19. 
B) 0.55 
C) 0.138 
D) 0.65 
A) 0.19. 
B) 0.55 
C) 0.138 
D) 0.65

Question 16

In highly contestable markets, increases in concentration will enhance market power.

Accepted Answer

A) True 
 B)False

Question 17

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 18

The Antitrust Division of the Department of Justice carefully scrutinizes mergers.Why?

Accepted Answer

Mergers can lead to an increase in marke

Question 19

The current deregulatory movement began to change laws to deregulation in the

Accepted Answer

A) early 1970s. 
B) late 1970s. 
C) early 1980s. 
D) early 1990s. 
A) early 1970s. 
B) late 1970s. 
C) early 1980s. 
D) early 1990s.

Question 20

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

Exam 13: Limiting Market Power: Regulation and Antitrust

A regulatory agency concerned with "universal service" must

Regulators often raise prices instead of lowering them.This is designed to

The main instrument of control of public monopolies is the regulatory agency.

Service to consumers of deregulated products has generally not diminished.

The Justice Department and the Federal Trade Commission are likely to oppose mergers

One possible solution to improve performance of regulated firms is which of the following?

In a market with only one firm (a pure monopoly), the Herfindahl-Hirschman Index (HHI) would equal 10,000.

Increasing concentration always means an industry has become effectively monopolized.

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

The federal government is most likely to oppose

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

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

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

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

The share of industry output sold by the top four steel producers in the country are 19%, 15%, 12%, and 9% respectively.The four-firm concentration ratio for the steel industry is

In highly contestable markets, increases in concentration will enhance market power.

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

The Antitrust Division of the Department of Justice carefully scrutinizes mergers.Why?

The current deregulatory movement began to change laws to deregulation in the

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

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

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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