Question 1

What would the Herfindahl-Hirschman Index equal for an industry consisting of six firms with market shares of 40%, 30%, 20%, 5%, 3%, and 2%?

Accepted Answer

A) 0.95 
B) 2.934 
C) 2,938 
D) 10,000 
A) 0.95 
B) 2.934 
C) 2,938 
D) 10,000

Question 2

If a firm's average cost is declining, setting price equal to marginal cost will

Accepted Answer

A) maximize the firm's profits. 
B) minimize the firm's losses. 
C) guarantee that the firm will lose money. 
D) help the firm earn the opportunity costs of its resources. 
A) maximize the firm's profits. 
B) minimize the firm's losses. 
C) guarantee that the firm will lose money. 
D) help the firm earn the opportunity costs of its resources.

Question 3

What does the Herfindahl-Hirschman Index value near zero imply about the market?

Accepted Answer

A) Monopoly 
B) Perfect competition 
C) Monopolistic competition 
D) Oligopoly 
A) Monopoly 
B) Perfect competition 
C) Monopolistic competition 
D) Oligopoly

Question 4

Economies of scope are present when a bank also sells insurance and provides brokerage services for stocks and bonds.

Accepted Answer

A) True 
 B)False

Question 5

One problem that haunts most antitrust litigation is that:

Accepted Answer

A) ​the government seldom wins. 
B) ​the appearance of vigorous competition resembles acts that undermine competition. 
C) ​it has the effect of preventing firms from being tough on their rivals. 
D) ​the defendant firm may be destroyed. 
A) ​the government seldom wins. 
B) ​the appearance of vigorous competition resembles acts that undermine competition. 
C) ​it has the effect of preventing firms from being tough on their rivals. 
D) ​the defendant firm may be destroyed.

Question 6

The aim of antitrust policy is to

Accepted Answer

A) provide adequate incentives for inventors and entrepreneurs. 
B) prevent firms from acquiring or exercising undue market power. 
C) prevent firms from becoming very large. 
D) regulate the prices charged by oligopolies. 
A) provide adequate incentives for inventors and entrepreneurs. 
B) prevent firms from acquiring or exercising undue market power. 
C) prevent firms from becoming very large. 
D) regulate the prices charged by oligopolies.

Question 7

In the case of Intimate Bookshop v.Barnes & Noble, Intimate alleged that Barnes & Noble

Accepted Answer

A) was bundling products in order to reduce competition. 
B) used technological advances to sell at lower prices. 
C) was buying books at discriminatory prices. 
D) had merged with other competitors in an effort to gain monopoly power. 
A) was bundling products in order to reduce competition. 
B) used technological advances to sell at lower prices. 
C) was buying books at discriminatory prices. 
D) had merged with other competitors in an effort to gain monopoly power.

Question 8

If a firm is a natural monopoly, society will benefit if it is broken into several small companies.

Accepted Answer

A) True 
 B)False

Question 9

Some critics of antitrust are worried that some firms

Accepted Answer

A) will seek to increase competition to a dangerous level. 
B) will collude in order to avoid the laws. 
C) may use antitrust to prevent competition. 
D) may go out of business from large damage awards. 
A) will seek to increase competition to a dangerous level. 
B) will collude in order to avoid the laws. 
C) may use antitrust to prevent competition. 
D) may go out of business from large damage awards.

Question 10

Discuss some of the reasons why monopoly power is considered undesirable.

Accepted Answer

a.Antitrust policy is designed to preven

Question 11

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

Accepted Answer

A) must have become more competitive. 
B) must have become a monopoly. 
C) must have become less competitive, although not necessarily a monopoly. 
D) may or may not have become less competitive. 
A) must have become more competitive. 
B) must have become a monopoly. 
C) must have become less competitive, although not necessarily a monopoly. 
D) may or may not have become less competitive.

Question 12

The most important advantages of bigness will be found in industries that show increasing returns to scale.

Accepted Answer

A) True 
 B)False

Question 13

Firm A's motive in filing an antitrust suit against Firm B may be

Accepted Answer

A) to seek court protection against genuinely unfair practices by Firm B. 
B) to seek financial compensation for damages caused by Firm B. 
C) to create an expensive nuisance for Firm B. 
D) All of the above are correct. 
A) to seek court protection against genuinely unfair practices by Firm B. 
B) to seek financial compensation for damages caused by Firm B. 
C) to create an expensive nuisance for Firm B. 
D) All of the above are correct.

Question 14

The federal government has the power to investigate and to try to block

Accepted Answer

A) only voluntary mergers between firms. 
B) only hostile takeovers. 
C) only friendly takeovers. 
D) any combining of the ownership of previously independent firms that increases concentration. 
A) only voluntary mergers between firms. 
B) only hostile takeovers. 
C) only friendly takeovers. 
D) any combining of the ownership of previously independent firms that increases concentration.

Question 15

Economies of scale tend to create natural monopolies.

Accepted Answer

A) True 
 B)False

Question 16

In regulated industries, the optimal regulation is to set price such that MC=P.

Accepted Answer

A) True 
 B)False

Question 17

High prices redistribute wealth from consumers to firms.

Accepted Answer

A) True 
 B)False

Question 18

Using specialized equipment to produce simultaneously a number of similar items

Accepted Answer

A) leads to economies of scale. 
B) is the goal of deregulation. 
C) can only happen in a high technology nation. 
D) is called economies of scope. 
A) leads to economies of scale. 
B) is the goal of deregulation. 
C) can only happen in a high technology nation. 
D) is called economies of scope.

Question 19

Deregulation has led to higher prices.

Accepted Answer

A) True 
 B)False

Question 20

If all large firms in the economy were broken into smaller firms, the result might be

Accepted Answer

A) decreased manufacturing efficiency in some industries. 
B) increased prices for some manufactured goods. 
C) decreased investment in research and development in some industries. 
D) All of the above are correct. 
A) decreased manufacturing efficiency in some industries. 
B) increased prices for some manufactured goods. 
C) decreased investment in research and development in some industries. 
D) All of the above are correct.

Exam 13: Limiting Market Power: Regulation and Antitrust

What would the Herfindahl-Hirschman Index equal for an industry consisting of six firms with market shares of 40%, 30%, 20%, 5%, 3%, and 2%?

If a firm's average cost is declining, setting price equal to marginal cost will

What does the Herfindahl-Hirschman Index value near zero imply about the market?

Economies of scope are present when a bank also sells insurance and provides brokerage services for stocks and bonds.

One problem that haunts most antitrust litigation is that:

The aim of antitrust policy is to

In the case of Intimate Bookshop v.Barnes & Noble, Intimate alleged that Barnes & Noble

If a firm is a natural monopoly, society will benefit if it is broken into several small companies.

Some critics of antitrust are worried that some firms

Discuss some of the reasons why monopoly power is considered undesirable.

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

The most important advantages of bigness will be found in industries that show increasing returns to scale.

Firm A's motive in filing an antitrust suit against Firm B may be

The federal government has the power to investigate and to try to block

Economies of scale tend to create natural monopolies.

In regulated industries, the optimal regulation is to set price such that MC=P.

High prices redistribute wealth from consumers to firms.

Using specialized equipment to produce simultaneously a number of similar items

Deregulation has led to higher prices.

If all large firms in the economy were broken into smaller firms, the result might be

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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