Question 1

All competition laws help competition.

Accepted Answer

A) True 
 B)False

Question 2

Predatory pricing occurs when a firm sells its product at a price below the cost to drive out a competing firm. This reduces long run competition so the firm can then charge much higher prices.

Accepted Answer

A) True 
 B)False

Question 3

Competition laws in the US are referred to as:

Accepted Answer

A)  antitrust laws 
B)  trade practices laws 
C)  enterprise laws 
D)  none of the above 
A)  antitrust laws 
B)  trade practices laws 
C)  enterprise laws 
D)  none of the above

Question 4

Economists usually prefer private ownership to public ownership of natural monopolies because private owners have an incentive to:

Accepted Answer

A)  maximise cost as long as they reap part of the benefit in the form of lower profit 
B)  minimise cost as long as they reap part of the benefit in the form of lower profit 
C)  maximise cost as long as they reap part of the benefit in the form of higher profit 
D)  minimise cost as long as they reap part of the benefit in the form of higher profit 
A)  maximise cost as long as they reap part of the benefit in the form of lower profit 
B)  minimise cost as long as they reap part of the benefit in the form of lower profit 
C)  maximise cost as long as they reap part of the benefit in the form of higher profit 
D)  minimise cost as long as they reap part of the benefit in the form of higher profit

Question 5

The main rationale for making tying illegal is that:

Accepted Answer

A)  it allows firms to form collusive arrangements 
B)  it increases the availability of movies to the public 
C)  collusive agreements are not conducive to cooperative outcomes 
D)  it allows firms to expand their market power 
A)  it allows firms to form collusive arrangements 
B)  it increases the availability of movies to the public 
C)  collusive agreements are not conducive to cooperative outcomes 
D)  it allows firms to expand their market power

Question 6

In the Microsoft antitrust lawsuit, Microsoft's lawyers argued that selling an internet browser and operating system together is no different to:

Accepted Answer

A)  selling a car with a radio 
B)  selling a camera with a flash 
C)  selling a car with an air conditioner 
D)  all of the above 
A)  selling a car with a radio 
B)  selling a camera with a flash 
C)  selling a car with an air conditioner 
D)  all of the above

Question 7

The practice of requiring someone to buy two or more items together, rather than separately, is called:

Accepted Answer

A)  product fixing 
B)  tying 
C)  free riding 
D)  resale maintenance 
A)  product fixing 
B)  tying 
C)  free riding 
D)  resale maintenance

Question 8

Suppose that one forestry company can operate at a lower average cost than several smaller firms. The forestry company is a natural monopoly in this local region. If the government was to regulate log prices to equal marginal cost, then this would:

Accepted Answer

A)  result in a less than optimal total surplus for the log market 
B)  maximise the forestry company's producer surplus 
C)  cause the forestry company to operate at a loss 
D)  do all of the above 
A)  result in a less than optimal total surplus for the log market 
B)  maximise the forestry company's producer surplus 
C)  cause the forestry company to operate at a loss 
D)  do all of the above

Question 9

Government policies to reduce the monopoly problem can create larger costs via political failure than the actual market failure costs.

Accepted Answer

A) True 
 B)False

Question 10

Economists argue that transparent pricing will:

Accepted Answer

A)  make it more difficult for a cartel to sustain high prices 
B)  lead to vigorous competition among firms 
C)  make it easier for firms to collude 
D)  make it easier for producers to cheat on any cartel agreement 
A)  make it more difficult for a cartel to sustain high prices 
B)  lead to vigorous competition among firms 
C)  make it easier for firms to collude 
D)  make it easier for producers to cheat on any cartel agreement

Question 11

The main agency in Australia that enforces competition protection is the Australasian Competition and Consumer Commission (ACCC).

Accepted Answer

A) True 
 B)False

Question 12

If a manufacturer does not exercise retail price maintenance, a free-rider problem may become evident among retailers and ultimately lead to:

Accepted Answer

A)  transparent pricing 
B)  tying 
C)  lower profits for the manufacturer 
D)  higher profits for the manufacturer 
A)  transparent pricing 
B)  tying 
C)  lower profits for the manufacturer 
D)  higher profits for the manufacturer

Question 13

One problem with government regulation of monopolies is that:

Accepted Answer

A)  a benevolent government is likely to be interested in generating profits for political gain 
B)  the government typically has little incentive to reduce costs 
C)  regulated industries typically have rising average costs 
D)  a government regulated outcome will increase the profitability of the monopoly 
A)  a benevolent government is likely to be interested in generating profits for political gain 
B)  the government typically has little incentive to reduce costs 
C)  regulated industries typically have rising average costs 
D)  a government regulated outcome will increase the profitability of the monopoly

Question 14

Economists argue that there are no practical problems with marginal-cost pricing as a regulatory system.

Accepted Answer

A) True 
 B)False

Question 15

A government can impose a tax on a regulated monopolist to address the problems associated with marginal-cost pricing.

Accepted Answer

A) True 
 B)False

Question 16

Resale price maintenance prevents retailers from competing on price.

Accepted Answer

A) True 
 B)False

Question 17

The business practice of tying:

Accepted Answer

A)  is also referred to as bundling 
B)  is also referred to as full-line forcing 
C)  can increase business revenue 
D)  all of the above are true 
A)  is also referred to as bundling 
B)  is also referred to as full-line forcing 
C)  can increase business revenue 
D)  all of the above are true

Question 18

When attempting to limit the market power of a natural monopoly, governments tend to:

Accepted Answer

A)  use regulations to limit prices 
B)  turn these monopolies into public enterprises 
C)  split natural monopolies into smaller companies 
D)  by all of the above measures 
A)  use regulations to limit prices 
B)  turn these monopolies into public enterprises 
C)  split natural monopolies into smaller companies 
D)  by all of the above measures

Question 19

One problem with regulating a monopolist on the basis of cost is that:

Accepted Answer

A)  a monopolist is still able to generate excessive economic profits 
B)  regulators are unable to effectively control prices and/or production 
C)  a monopolist's costs, by definition, are higher than costs of perfectly competitive firms 
D)  it does not provide an incentive for the monopolist to reduce its cost 
A)  a monopolist is still able to generate excessive economic profits 
B)  regulators are unable to effectively control prices and/or production 
C)  a monopolist's costs, by definition, are higher than costs of perfectly competitive firms 
D)  it does not provide an incentive for the monopolist to reduce its cost

Question 20

What is resale price maintenance, predatory pricing and tying?

Accepted Answer

Resale price maintenance is when a whole

Exam 17: Competition Policy

All competition laws help competition.

Predatory pricing occurs when a firm sells its product at a price below the cost to drive out a competing firm. This reduces long run competition so the firm can then charge much higher prices.

Competition laws in the US are referred to as:

Economists usually prefer private ownership to public ownership of natural monopolies because private owners have an incentive to:

The main rationale for making tying illegal is that:

In the Microsoft antitrust lawsuit, Microsoft's lawyers argued that selling an internet browser and operating system together is no different to:

The practice of requiring someone to buy two or more items together, rather than separately, is called:

Suppose that one forestry company can operate at a lower average cost than several smaller firms. The forestry company is a natural monopoly in this local region. If the government was to regulate log prices to equal marginal cost, then this would:

Government policies to reduce the monopoly problem can create larger costs via political failure than the actual market failure costs.

Economists argue that transparent pricing will:

The main agency in Australia that enforces competition protection is the Australasian Competition and Consumer Commission (ACCC).

If a manufacturer does not exercise retail price maintenance, a free-rider problem may become evident among retailers and ultimately lead to:

One problem with government regulation of monopolies is that:

Economists argue that there are no practical problems with marginal-cost pricing as a regulatory system.

A government can impose a tax on a regulated monopolist to address the problems associated with marginal-cost pricing.

Resale price maintenance prevents retailers from competing on price.

The business practice of tying:

When attempting to limit the market power of a natural monopoly, governments tend to:

One problem with regulating a monopolist on the basis of cost is that:

What is resale price maintenance, predatory pricing and tying?

Ten Lessons From Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand and Government Policies

Consumers, Producers and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Business Strategy

Monopolistic Competition

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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