Question 1

Mergers harm society.

Accepted Answer

A)  True. Firms merge to avoid antitrust laws and increase their prices. 
B)  Maybe. It depends on whether the effect on prices is larger from reducing competition or increasing efficiency. 
C)  False. Firms gain economies of scale and pass the price savings on to their customers. 
D)  True. Total surplus is reduced when firms merge. 
A)  True. Firms merge to avoid antitrust laws and increase their prices. 
B)  Maybe. It depends on whether the effect on prices is larger from reducing competition or increasing efficiency. 
C)  False. Firms gain economies of scale and pass the price savings on to their customers. 
D)  True. Total surplus is reduced when firms merge.

Question 2

If a policy helps some but harms others

Accepted Answer

A)  the result is a Pareto improvement for the people who are helped. 
B)  then the cost-benefit analysis will show a net increase in surplus and is therefore desirable. 
C)  we cannot use the Pareto principle to evaluate whether or not the policy is desirable. 
D)  it is too hard to determine whether or not the outcome is desirable. 
A)  the result is a Pareto improvement for the people who are helped. 
B)  then the cost-benefit analysis will show a net increase in surplus and is therefore desirable. 
C)  we cannot use the Pareto principle to evaluate whether or not the policy is desirable. 
D)  it is too hard to determine whether or not the outcome is desirable.

Question 3

-The above figure shows the market for steel ingots.The socially optimal quantity of steel is

Accepted Answer

A)  0 units. 
B)  50 units. 
C)  100 units. 
D)  produced if the market were competitive. 
A)  0 units. 
B)  50 units. 
C)  100 units. 
D)  produced if the market were competitive.

Question 4

Rent seeking is

Accepted Answer

A)  when consumers search for the lowest possible rent on housing. 
B)  illegal in the U.S. 
C)  what regulators do to improve their chances of getting jobs in the regulated industry after they leave government service. 
D)  where firms expend effort and money to profit from government actions. 
A)  when consumers search for the lowest possible rent on housing. 
B)  illegal in the U.S. 
C)  what regulators do to improve their chances of getting jobs in the regulated industry after they leave government service. 
D)  where firms expend effort and money to profit from government actions.

Question 5

In the U.S.,one example of a cartel that is legal is

Accepted Answer

A)  the railroads, including Union Pacific. 
B)  the oil industry. 
C)  Major League Baseball. 
D)  None, all cartels are prohibited. 
A)  the railroads, including Union Pacific. 
B)  the oil industry. 
C)  Major League Baseball. 
D)  None, all cartels are prohibited.

Question 6

One problem with trying to regulate a monopoly's price?

Accepted Answer

A)  The government needs information on the monopoly's marginal cost. 
B)  The government needs information on the maximum quantity the monopoly can supply. 
C)  The government needs to identify which firm is a monopolist. 
D)  Anything that the government does is problematic. 
A)  The government needs information on the monopoly's marginal cost. 
B)  The government needs information on the maximum quantity the monopoly can supply. 
C)  The government needs to identify which firm is a monopolist. 
D)  Anything that the government does is problematic.

Question 7

The exclusive privilege to use an asset is called a(n)

Accepted Answer

A)  property right. 
B)  exclusive use agreement. 
C)  property privilege. 
D)  right to work privilege. 
A)  property right. 
B)  exclusive use agreement. 
C)  property privilege. 
D)  right to work privilege.

Question 8

Mergers are closely scrutinized by the government because

Accepted Answer

A)  they might allow the firms involved to dominate the market and act as a legalized cartel (monopoly). 
B)  they always result in a more efficient market. 
C)  the always result in lower joint profits of the firms involved. 
D)  all mergers are undesirable. 
A)  they might allow the firms involved to dominate the market and act as a legalized cartel (monopoly). 
B)  they always result in a more efficient market. 
C)  the always result in lower joint profits of the firms involved. 
D)  all mergers are undesirable.

Question 9

Positive externalities are created when

Accepted Answer

A)  other consumers reduce their demand for coffee and price thereby declines. 
B)  farmers spray pesticide in their fields and it washes into the local river after the first rainstorm. 
C)  your neighbor plants beautiful trees and flowers in her yard. 
D)  you purchase the "Mona Lisa" and lock it in a vault. 
A)  other consumers reduce their demand for coffee and price thereby declines. 
B)  farmers spray pesticide in their fields and it washes into the local river after the first rainstorm. 
C)  your neighbor plants beautiful trees and flowers in her yard. 
D)  you purchase the "Mona Lisa" and lock it in a vault.

Question 10

Consider a housing development built near an existing airport.After the houses are occupied,homeowners complain that the airport imposes a negative externality on them and it should be moved or otherwise limited.Is the airport a negative externality?

Accepted Answer

A)  No, the airport was there first. 
B)  No, if the original property values reflect the costs imposed by the airport. 
C)  No, airports are government entities and therefore don't impose costs on individuals. 
D)  Yes, the airport's noise should be curtailed for the well-being of the homeowners. 
A)  No, the airport was there first. 
B)  No, if the original property values reflect the costs imposed by the airport. 
C)  No, airports are government entities and therefore don't impose costs on individuals. 
D)  Yes, the airport's noise should be curtailed for the well-being of the homeowners.

Question 11

If a monopolist's production process has economies of scale and average cost exceeds marginal cost,then

Accepted Answer

A)  the government could set price equal to marginal cost and subsidize the monopoly. 
B)  the government should not offer a subsidy, since the monopoly can make a profit setting price equal to marginal costs. 
C)  if the government sets price equal to average cost, the monopoly will go out of business. 
D)  the government cannot regulate price. 
A)  the government could set price equal to marginal cost and subsidize the monopoly. 
B)  the government should not offer a subsidy, since the monopoly can make a profit setting price equal to marginal costs. 
C)  if the government sets price equal to average cost, the monopoly will go out of business. 
D)  the government cannot regulate price.

Question 12

If the government regulates the price a monopoly can charge,and the price ceiling is set below what the competitive market price would be,then

Accepted Answer

A)  there will be excess supply. 
B)  there will be excess demand. 
C)  producer surplus is maximized. 
D)  consumer surplus is maximized. 
A)  there will be excess supply. 
B)  there will be excess demand. 
C)  producer surplus is maximized. 
D)  consumer surplus is maximized.

Question 13

In the U.S.,the ________ and the ________ prohibit firms from explicitly agreeing to take actions that reduce competition.

Accepted Answer

A)  Department of Justice Act; Federal Trade Commission Act 
B)  Sherman Antitrust Act; Federal Trade Commission Act 
C)  Per Se Act; Sherman Antitrust Act 
D)  Pareto Act; Anti-Cartel Act 
A)  Department of Justice Act; Federal Trade Commission Act 
B)  Sherman Antitrust Act; Federal Trade Commission Act 
C)  Per Se Act; Sherman Antitrust Act 
D)  Pareto Act; Anti-Cartel Act

Question 14

If children go to school and become productive members of society

Accepted Answer

A)  a negative externality is created by the schools. 
B)  a positive externality is created by the schools. 
C)  no externality is created by the schools. 
D)  an externality is created that may be positive or negative. 
A)  a negative externality is created by the schools. 
B)  a positive externality is created by the schools. 
C)  no externality is created by the schools. 
D)  an externality is created that may be positive or negative.

Question 15

Negative externalities are created when

Accepted Answer

A)  an increase in the price of butterfat drives up the price of ice cream. 
B)  a driver leaves his car in a parking space after the meter expires and receives a ticket. 
C)  a driver drives recklessly on a busy highway. 
D)  a driver pulls over to help a stranded motorist fix a flat tire. 
A)  an increase in the price of butterfat drives up the price of ice cream. 
B)  a driver leaves his car in a parking space after the meter expires and receives a ticket. 
C)  a driver drives recklessly on a busy highway. 
D)  a driver pulls over to help a stranded motorist fix a flat tire.

Question 16

Who said "If it moves,tax it.If it still moves,regulate it.If it stops moving,subsidize it."?

Accepted Answer

A)  Barack Obama 
B)  Ronald Reagan 
C)  Vilfredo Pareto 
D)  Adam Smith 
A)  Barack Obama 
B)  Ronald Reagan 
C)  Vilfredo Pareto 
D)  Adam Smith

Question 17

What is one reason drunk driving is held in such disrepute?

Accepted Answer

A)  Drunk driving imposes high potential costs on non-drunk drivers. 
B)  Drunk driving destroys cars and telephone poles, causing disruption in essential services. 
C)  Only drunk drivers cause automobile fatalities. 
D)  Drunk drivers impose high potential costs on other drunk drivers. 
A)  Drunk driving imposes high potential costs on non-drunk drivers. 
B)  Drunk driving destroys cars and telephone poles, causing disruption in essential services. 
C)  Only drunk drivers cause automobile fatalities. 
D)  Drunk drivers impose high potential costs on other drunk drivers.

Question 18

One way a government can eliminate a market failure

Accepted Answer

A)  is to regulate the price so that it equals marginal cost. 
B)  is to implement a price floor equal to marginal cost. 
C)  is to regulate the price so that it is below average cost. 
D)  None of the above solutions will eliminate a market failure. 
A)  is to regulate the price so that it equals marginal cost. 
B)  is to implement a price floor equal to marginal cost. 
C)  is to regulate the price so that it is below average cost. 
D)  None of the above solutions will eliminate a market failure.

Question 19

When the government charges an output tax to eliminate an externality,it forces the manufacturer to ________ the negative externality.

Accepted Answer

A)  charge customers for 
B)  internalize 
C)  stop producing 
D)  increase the production of 
A)  charge customers for 
B)  internalize 
C)  stop producing 
D)  increase the production of

Question 20

When attempting price regulation a government faces what problem(s)?

Accepted Answer

A)  limited information 
B)  bribes 
C)  uncooperative firms 
D)  All of the above. 
A)  limited information 
B)  bribes 
C)  uncooperative firms 
D)  All of the above.

Mergers harm society.

If a policy helps some but harms others

-The above figure shows the market for steel ingots.The socially optimal quantity of steel is

Rent seeking is

In the U.S.,one example of a cartel that is legal is

One problem with trying to regulate a monopoly's price?

The exclusive privilege to use an asset is called a(n)

Mergers are closely scrutinized by the government because

Positive externalities are created when

Consider a housing development built near an existing airport.After the houses are occupied,homeowners complain that the airport imposes a negative externality on them and it should be moved or otherwise limited.Is the airport a negative externality?

If a monopolist's production process has economies of scale and average cost exceeds marginal cost,then

If the government regulates the price a monopoly can charge,and the price ceiling is set below what the competitive market price would be,then

In the U.S.,the and the prohibit firms from explicitly agreeing to take actions that reduce competition.

If children go to school and become productive members of society

Negative externalities are created when

Who said "If it moves,tax it.If it still moves,regulate it.If it stops moving,subsidize it."?

What is one reason drunk driving is held in such disrepute?

One way a government can eliminate a market failure

When the government charges an output tax to eliminate an externality,it forces the manufacturer to ________ the negative externality.

When attempting price regulation a government faces what problem(s)?

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Global Business

Filters

Exam 16: Government and Business

Mergers harm society.

If a policy helps some but harms others

-The above figure shows the market for steel ingots.The socially optimal quantity of steel is

Rent seeking is

In the U.S.,one example of a cartel that is legal is

One problem with trying to regulate a monopoly's price?

The exclusive privilege to use an asset is called a(n)

Mergers are closely scrutinized by the government because

Positive externalities are created when

Consider a housing development built near an existing airport.After the houses are occupied,homeowners complain that the airport imposes a negative externality on them and it should be moved or otherwise limited.Is the airport a negative externality?

If a monopolist's production process has economies of scale and average cost exceeds marginal cost,then

If the government regulates the price a monopoly can charge,and the price ceiling is set below what the competitive market price would be,then

In the U.S.,the ________ and the ________ prohibit firms from explicitly agreeing to take actions that reduce competition.

If children go to school and become productive members of society

Negative externalities are created when

Who said "If it moves,tax it.If it still moves,regulate it.If it stops moving,subsidize it."?

What is one reason drunk driving is held in such disrepute?

One way a government can eliminate a market failure

When the government charges an output tax to eliminate an externality,it forces the manufacturer to ________ the negative externality.

When attempting price regulation a government faces what problem(s)?

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Global Business

Filters

In the U.S.,the and the prohibit firms from explicitly agreeing to take actions that reduce competition.