Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The antitrust laws are sometimes used by companies to reduce competition in their markets rather than enhance it.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Monopolies may be the only firms large enough to commercially produce a significantly innovative new product.

Accepted Answer

A) True 
 B)False

Question 5

One reason regulators push for higher prices in an industry is to

Accepted Answer

A) prevent excess profits in the industry. 
B) protect the public from excessively low prices. 
C) encourage usage of the good or service. 
D) protect against the demise of existing firms. 
A) prevent excess profits in the industry. 
B) protect the public from excessively low prices. 
C) encourage usage of the good or service. 
D) protect against the demise of existing firms.

Question 6

Concentration ratios have not been studied much in the last century.

Accepted Answer

A) True 
 B)False

Question 7

Economies of scope are savings acquired by

Accepted Answer

A) producing many goods simultaneously. 
B) producing enough of one good to reach the minimum efficient scale of production. 
C) selling one product at a loss but selling other products at a profit. 
D) decreasing the regulation of an industry. 
A) producing many goods simultaneously. 
B) producing enough of one good to reach the minimum efficient scale of production. 
C) selling one product at a loss but selling other products at a profit. 
D) decreasing the regulation of an industry.

Question 8

A monopoly firm operates with declining marginal cost.If regulators impose marginal cost pricing, the market will

Accepted Answer

A) remain a monopoly but behave like a perfectly competitive industry. 
B) become perfectly competitive. 
C) be entered by additional firms but will not necessarily become perfectly competitive. 
D) be exited by the existing firm if the regulators will let the firm leave the market. 
A) remain a monopoly but behave like a perfectly competitive industry. 
B) become perfectly competitive. 
C) be entered by additional firms but will not necessarily become perfectly competitive. 
D) be exited by the existing firm if the regulators will let the firm leave the market.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Modern antitrust policy began in response to

Accepted Answer

A) abuses of market power in the oil industry. 
B) the inability of railroads to compete effectively with the new trucking industry. 
C) the charge that the rights of big business were not adequately protected. 
D) attempts by business leaders to pack Congress with corrupt legislators. 
A) abuses of market power in the oil industry. 
B) the inability of railroads to compete effectively with the new trucking industry. 
C) the charge that the rights of big business were not adequately protected. 
D) attempts by business leaders to pack Congress with corrupt legislators.

Question 11

On balance, does market power promote or retard technological innovation?

Accepted Answer

The evidence is not clear-cut.While smal

Question 12

If average cost is declining,

Accepted Answer

A) marginal cost must be below average cost. 
B) firms would go bankrupt if all prices were set equal to marginal costs. 
C) marginal cost may be declining or increasing. 
D) All of the above are correct. 
A) marginal cost must be below average cost. 
B) firms would go bankrupt if all prices were set equal to marginal costs. 
C) marginal cost may be declining or increasing. 
D) All of the above are correct.

Question 13

Which of the following acts prohibited false advertising?

Accepted Answer

A) Sherman Act 
B) Clayton Act 
C) Federal Trade Commission Act 
D) Celler-Kefauver Act 
A) Sherman Act 
B) Clayton Act 
C) Federal Trade Commission Act 
D) Celler-Kefauver Act

Question 14

Distinguish between predatory pricing strategy and bundling strategy.

Accepted Answer

Predatory pricing is pricing that threat

Question 15

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 16

"Cream skimming" usually results in

Accepted Answer

A) cross-subsidization of markets. 
B) subsidies to rural consumers of the service. 
C) regulations to provide universal service. 
D) monopoly. 
A) cross-subsidization of markets. 
B) subsidies to rural consumers of the service. 
C) regulations to provide universal service. 
D) monopoly.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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 19

While monopoly power can be abused, it can also be used beneficially.What are the major pros and cons of largeness in business?

Accepted Answer

The following pros of largenes

Question 20

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

Exam 13: Limiting Market Power: Regulation and Antitrust

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

The antitrust laws are sometimes used by companies to reduce competition in their markets rather than enhance it.

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

Monopolies may be the only firms large enough to commercially produce a significantly innovative new product.

One reason regulators push for higher prices in an industry is to

Concentration ratios have not been studied much in the last century.

Economies of scope are savings acquired by

A monopoly firm operates with declining marginal cost.If regulators impose marginal cost pricing, the market will

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

Modern antitrust policy began in response to

On balance, does market power promote or retard technological innovation?

If average cost is declining,

Which of the following acts prohibited false advertising?

Distinguish between predatory pricing strategy and bundling strategy.

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

"Cream skimming" usually results in

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

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

While monopoly power can be abused, it can also be used beneficially.What are the major pros and cons of largeness in business?

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

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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