Question 1

Corporatisation is the process of providing incentives to make them behave more like private owners.

Accepted Answer

A) True 
 B)False

Question 2

Why do economists usually prefer private ownership to public ownership of natural monopolies?

Accepted Answer

Private owners have an incentive to mini

Question 3

Private ownership of a monopoly cannot benefit society.

Accepted Answer

A) True 
 B)False

Question 4

There are some logical economic arguments in favour of resale price maintenance.

Accepted Answer

A) True 
 B)False

Question 5

A central issue in the Microsoft antitrust lawsuit involved Microsoft's integrating its internet browser into its Windows operating system, to be sold as one unit. This practice is known as:

Accepted Answer

A)  price fixing 
B)  resale maintenance 
C)  tying 
D)  collusion 
A)  price fixing 
B)  resale maintenance 
C)  tying 
D)  collusion

Question 6

A local bank sells two services, cheque accounts and ATM card services. Mr Donethat is willing to pay $8 a month for the bank to service his cheque account and $2 a month for unlimited use of his ATM card. Ms Beenthere is willing to pay only $5 for a cheque account but is willing to pay $9 for unlimited use of her ATM card. To keep this example simple, assume that the bank can provide each of these services at zero marginal cost.
-According to the information provided, if the bank is unable to use tying, what is the profit-maximising price to charge for unlimited use of an ATM card?

Accepted Answer

A)  $2 
B)  $19 
C)  $15 
D)  $9 
A)  $2 
B)  $19 
C)  $15 
D)  $9

Question 7

A local bank sells two services, cheque accounts and ATM card services. Mr Donethat is willing to pay $8 a month for the bank to service his cheque account and $2 a month for unlimited use of his ATM card. Ms Beenthere is willing to pay only $5 for a cheque account but is willing to pay $9 for unlimited use of her ATM card. To keep this example simple, assume that the bank can provide each of these services at zero marginal cost.
-According to the information provided, how much additional profit does the bank make when it switches to use of a tying strategy to price cheque account and ATM services?

Accepted Answer

A)  $14 
B)  $8 
C)  $10 
D)  $1 
A)  $14 
B)  $8 
C)  $10 
D)  $1

Question 8

Explain the practice of tying and discuss why it is controversial.

Accepted Answer

Tying is the practice of bundling goods

Question 9

Tying is becoming increasingly important in the market for:

Accepted Answer

A)  crude oil 
B)  long-distance phone calls 
C)  wheat 
D)  computer software 
A)  crude oil 
B)  long-distance phone calls 
C)  wheat 
D)  computer software

Question 10

If purchasers value two products differently, tying may allow a seller to increase profit by charging a combined price closer to the purchasers' total willingness to pay.

Accepted Answer

A) True 
 B)False

Question 11

The proper level of government intervention is ambiguous when dealing with a monopoly.

Accepted Answer

A) True 
 B)False

Question 12

Government-run monopolies may lead to undesirable outcomes in the form of:

Accepted Answer

A)  special interest groups that attempt to block cost reductions 
B)  customer and taxpayer losses when the monopoly operates inefficiently 
C)  the political system as the only avenue of recourse for customers 
D)  all of the above 
A)  special interest groups that attempt to block cost reductions 
B)  customer and taxpayer losses when the monopoly operates inefficiently 
C)  the political system as the only avenue of recourse for customers 
D)  all of the above

Question 13

The Competition and Consumer Act makes it illegal for companies to make a contract or arrangement that would substantially lessen competition

Accepted Answer

A) True 
 B)False

Question 14

Transparent pricing may help a cartel to sustain high prices.

Accepted Answer

A) True 
 B)False

Question 15

Consider two potential book buyers, Tom and Jane, who are considering whether to purchase two books, book A and bookB.
(a) If each book is sold at $12, how much revenue will the seller receive?
(b) If each book is sold for $10, how much revenue will the seller receive?
(c) If the seller ties or bundles the two books together and charges $22 for the two tied products, how much revenue will the seller receive?
(d) Why does tying or bundling increase revenue?B. Assume that the maximum Tom is willing to pay for book A is $12 dollars, while he is willing to pay $10 dollars for bookB. Jane is willing to pay $10 for book A and $12 dollars for book

Accepted Answer

(a) $24
(b) $40
(c) $44
(d) Th

Question 16

Some business practices that appear to reduce competition may have legitimate business purposes.

Accepted Answer

A) True 
 B)False

Question 17

Under common law, courts will typically enforce contracts between competitors that reduce competition and increase prices.

Accepted Answer

A) True 
 B)False

Question 18

Why might economists prefer private ownership of monopolies over public ownership of monopolies?

Accepted Answer

The private monopolist is governed by th

Question 19

The argument that consumers will not be willing to pay any more for two items sold as one than they would for the two items sold separately is used to justify the legality of resale price maintenance.

Accepted Answer

A) True 
 B)False

Question 20

To move the allocation of resources closer to the social optimum, policymakers should typically try to induce firms in an oligopoly to:

Accepted Answer

A)  cooperate rather than compete with each other 
B)  compete rather than cooperate with each other 
C)  collude with each other 
D)  form various levels of cartel 
A)  cooperate rather than compete with each other 
B)  compete rather than cooperate with each other 
C)  collude with each other 
D)  form various levels of cartel

Exam 17: Competition Policy

Corporatisation is the process of providing incentives to make them behave more like private owners.

Why do economists usually prefer private ownership to public ownership of natural monopolies?

Private ownership of a monopoly cannot benefit society.

There are some logical economic arguments in favour of resale price maintenance.

A central issue in the Microsoft antitrust lawsuit involved Microsoft's integrating its internet browser into its Windows operating system, to be sold as one unit. This practice is known as:

Explain the practice of tying and discuss why it is controversial.

Tying is becoming increasingly important in the market for:

If purchasers value two products differently, tying may allow a seller to increase profit by charging a combined price closer to the purchasers' total willingness to pay.

The proper level of government intervention is ambiguous when dealing with a monopoly.

Government-run monopolies may lead to undesirable outcomes in the form of:

The Competition and Consumer Act makes it illegal for companies to make a contract or arrangement that would substantially lessen competition

Transparent pricing may help a cartel to sustain high prices.

Some business practices that appear to reduce competition may have legitimate business purposes.

Under common law, courts will typically enforce contracts between competitors that reduce competition and increase prices.

Why might economists prefer private ownership of monopolies over public ownership of monopolies?

The argument that consumers will not be willing to pay any more for two items sold as one than they would for the two items sold separately is used to justify the legality of resale price maintenance.

To move the allocation of resources closer to the social optimum, policymakers should typically try to induce firms in an oligopoly to:

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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