Question 1

For politician or regulator of an industry, there is a clear trade-off between:

Accepted Answer

A)  supply and demand. 
B)  profits and costs of the regulated company. 
C)  prices charged consumers and profits earned by producers. 
D)  publicly spirited and self-interested individuals, 
A)  supply and demand. 
B)  profits and costs of the regulated company. 
C)  prices charged consumers and profits earned by producers. 
D)  publicly spirited and self-interested individuals,

Question 2

Regulating political campaign contributions is a big issue in Washington and many times we hear politicians making headlines by speaking against it, and trying to move legislation to prevent lobbying and in trying to gain more accountability in the system. But political campaign contributions and lobbying are at an all time high, with no end in sight. Why are the political pundits not successful in their actions?

Accepted Answer

Contributions help politicians in many w

Question 3

Which of the following regulatory procedures transfers wealth from consumers to producers?

Accepted Answer

A)  Property rights. 
B)  Transactions costs. 
C)  Zoning restrictions. 
D)  Banning guns. 
A)  Property rights. 
B)  Transactions costs. 
C)  Zoning restrictions. 
D)  Banning guns.

Question 4

The case study in the chapter uses World Motors Corporation (WM). This company, headquartered in Atlanta, is faced with two major regulatory thrusts. One - emission standards - catches WM with its major competitor having an efficient patented emission control device. The second - miles-per-gallon standards - finds WM in the same position as its competitors. Where would WM put its lobbying effort, assuming that conservation groups are currently lobbying strongly for higher emission standards?

Accepted Answer

Both types of regulations, emission stan

Question 5

Public Goods:

Accepted Answer

A)  are goods for a few, by a few and of a few. 
B)  are goods whose consumption by a few reduces the amount for the rest. 
C)  are goods whose consumption by one reduces the amount for others. 
D)  are goods whose consumption by one does not diminish the amount for others. 
A)  are goods for a few, by a few and of a few. 
B)  are goods whose consumption by a few reduces the amount for the rest. 
C)  are goods whose consumption by one reduces the amount for others. 
D)  are goods whose consumption by one does not diminish the amount for others.

Question 6

The FDIC insures each deposit up to $100,000 in the banking system. If you are a manager of a bank and if your bonus is tied to the number of loans you generate, will you care about the nature of the loans and their risk?

Accepted Answer

Obviously not. Since each deposit is ins

Question 7

Which of the following regulatory procedures transfers wealth from consumers to producers?

Accepted Answer

A)  Efficiency wages. 
B)  Licensing of doctors and dentists. 
C)  Deadweight loss. 
D)  Transactions cost. 
A)  Efficiency wages. 
B)  Licensing of doctors and dentists. 
C)  Deadweight loss. 
D)  Transactions cost.

Question 8

Most governments enforce patents, copyrights, and trademarks. While these are clear restrictions on free trade, it is believed that inventors and investors:

Accepted Answer

A)  generally oppose these restrictions as monopolistic. 
B)  favor these restrictions since they promote inventive activities. 
C)  are indifference since they have no impact on business. 
D)  prefer low prices to patents. 
A)  generally oppose these restrictions as monopolistic. 
B)  favor these restrictions since they promote inventive activities. 
C)  are indifference since they have no impact on business. 
D)  prefer low prices to patents.

Question 9

Many people believe that the supply and demand for regulation will result in the most powerful coalition group controlling the regulatory body. That powerful group is often made up of the companies that are supposed to be regulated. This theory is called:

Accepted Answer

A)  the capture theory. 
B)  adverse selection theory. 
C)  the law of demand. 
D)  market failure theory. 
A)  the capture theory. 
B)  adverse selection theory. 
C)  the law of demand. 
D)  market failure theory.

Question 10

The economic theory of regulation treats politicians as:

Accepted Answer

A)  publicly spirited individuals who work for the public welfare. 
B)  corrupt individuals who sell contracts to the highest bidders. 
C)  self-interested individuals who benefit themselves by supplying legislation. 
D)  people who only represent the small segment of the population that elects them. 
A)  publicly spirited individuals who work for the public welfare. 
B)  corrupt individuals who sell contracts to the highest bidders. 
C)  self-interested individuals who benefit themselves by supplying legislation. 
D)  people who only represent the small segment of the population that elects them.

Question 11

OSHA is charged with enforcing workplace safety regulations in the United States. Employees are not allowed to waive these safety rights or to trade them off for higher salaries. That means the safety standards are:

Accepted Answer

A)  alienable. 
B)  inalienable. 
C)  negotiable. 
D)  transferable. 
A)  alienable. 
B)  inalienable. 
C)  negotiable. 
D)  transferable.

Question 12

In some industries, pollution rights are sold from one company that does not need them to another that does. In recent years, conservation groups have purchased pollution rights so they cannot be exercised. Companies in need of pollution rights would find that:

Accepted Answer

A)  the supply of pollution rights had increased. 
B)  the prices of pollution rights had fallen. 
C)  the relative costs of pollution control equipment had gone up. 
D)  the supply of pollution rights had declined. 
A)  the supply of pollution rights had increased. 
B)  the prices of pollution rights had fallen. 
C)  the relative costs of pollution control equipment had gone up. 
D)  the supply of pollution rights had declined.

Question 13

The problem with public goods is:

Accepted Answer

A)  self-selection. 
B)  adverse selection. 
C)  moral hazard. 
D)  free-riding. 
A)  self-selection. 
B)  adverse selection. 
C)  moral hazard. 
D)  free-riding.

Question 14

A monopolist sets the price where marginal costs equal marginal revenue and the price is higher than the competitive level. Since there are some consumers who are willing to pay more than the marginal cost of production, then:

Accepted Answer

A)  there are gains to be made from more trade. 
B)  all gains from trade are exhausted. 
C)  it is clear that monopolists do not maximize profits. 
D)  it is clear that monopolists do make profits. 
A)  there are gains to be made from more trade. 
B)  all gains from trade are exhausted. 
C)  it is clear that monopolists do not maximize profits. 
D)  it is clear that monopolists do make profits.

Question 15

If property rights are very hard to assign and transactions costs are particularly high, then, given the Coase Theorem, externalities:

Accepted Answer

A)  may reduce the efficiency of resource allocation. 
B)  would leave resource efficiency unchanged. 
C)  allow resource allocations to remain efficient. 
D)  have not relationship to efficiency. 
A)  may reduce the efficiency of resource allocation. 
B)  would leave resource efficiency unchanged. 
C)  allow resource allocations to remain efficient. 
D)  have not relationship to efficiency.

Question 16

Which of the following regulatory procedures transfers wealth from consumers to producers?

Accepted Answer

A)  Import quotas and tariffs. 
B)  Efficiency wages. 
C)  Transactions costs. 
D)  Deadweight loss. 
A)  Import quotas and tariffs. 
B)  Efficiency wages. 
C)  Transactions costs. 
D)  Deadweight loss.

Question 17

In some industries, pollution rights are sold from one company that does not need them to another that does. In recent years, conservation groups have purchased pollution rights so they cannot be exercised. Companies in need of pollution rights would find that:

Accepted Answer

A)  the supply of pollution rights had increased. 
B)  the prices of pollution rights had fallen. 
C)  the relative costs of pollution control equipment had gone up. 
D)  the relative costs of pollution control equipment had fallen. 
A)  the supply of pollution rights had increased. 
B)  the prices of pollution rights had fallen. 
C)  the relative costs of pollution control equipment had gone up. 
D)  the relative costs of pollution control equipment had fallen.

Question 18

In a regulatory environment, the number of regulated companies is small and the payoff to successful lobbying is large, and the:

Accepted Answer

A)  number of consumers is also small, but their payoff to success is also small for each person. 
B)  number of consumers is large, and the payoff to success is small for each person. 
C)  number of regulators is small and corrupt. 
D)  supply of regulation is usually tied to another industry's success. 
A)  number of consumers is also small, but their payoff to success is also small for each person. 
B)  number of consumers is large, and the payoff to success is small for each person. 
C)  number of regulators is small and corrupt. 
D)  supply of regulation is usually tied to another industry's success.

Question 19

The idea that resource allocation can remain efficient, even in the presence of externalities, as long as property rights are clearly assigned and transactions costs are low is referred to as the:

Accepted Answer

A)  Law of Demand. 
B)  Black/Schloes Formula. 
C)  Coase Theorem. 
D)  Law of Diminishing Returns. 
A)  Law of Demand. 
B)  Black/Schloes Formula. 
C)  Coase Theorem. 
D)  Law of Diminishing Returns.

Question 20

The enforcement of contracts and the adjudication of contract disputes through the court system:

Accepted Answer

A)  is a major source of business inefficiency in the United States. 
B)  is not common in most of Europe. 
C)  is an important way to reduce transactions costs. 
D)  weakens the system of property rights. 
A)  is a major source of business inefficiency in the United States. 
B)  is not common in most of Europe. 
C)  is an important way to reduce transactions costs. 
D)  weakens the system of property rights.

Exam 21: Understanding the Business Environment: The Economics of Regulation

For politician or regulator of an industry, there is a clear trade-off between:

Which of the following regulatory procedures transfers wealth from consumers to producers?

Public Goods:

The FDIC insures each deposit up to $100,000 in the banking system. If you are a manager of a bank and if your bonus is tied to the number of loans you generate, will you care about the nature of the loans and their risk?

Which of the following regulatory procedures transfers wealth from consumers to producers?

Most governments enforce patents, copyrights, and trademarks. While these are clear restrictions on free trade, it is believed that inventors and investors:

Many people believe that the supply and demand for regulation will result in the most powerful coalition group controlling the regulatory body. That powerful group is often made up of the companies that are supposed to be regulated. This theory is called:

The economic theory of regulation treats politicians as:

OSHA is charged with enforcing workplace safety regulations in the United States. Employees are not allowed to waive these safety rights or to trade them off for higher salaries. That means the safety standards are:

In some industries, pollution rights are sold from one company that does not need them to another that does. In recent years, conservation groups have purchased pollution rights so they cannot be exercised. Companies in need of pollution rights would find that:

The problem with public goods is:

A monopolist sets the price where marginal costs equal marginal revenue and the price is higher than the competitive level. Since there are some consumers who are willing to pay more than the marginal cost of production, then:

If property rights are very hard to assign and transactions costs are particularly high, then, given the Coase Theorem, externalities:

Which of the following regulatory procedures transfers wealth from consumers to producers?

In some industries, pollution rights are sold from one company that does not need them to another that does. In recent years, conservation groups have purchased pollution rights so they cannot be exercised. Companies in need of pollution rights would find that:

In a regulatory environment, the number of regulated companies is small and the payoff to successful lobbying is large, and the:

The idea that resource allocation can remain efficient, even in the presence of externalities, as long as property rights are clearly assigned and transactions costs are low is referred to as the:

The enforcement of contracts and the adjudication of contract disputes through the court system:

Introduction

Economists View of Behavior

Markets, Organizations, and the Role of Knowledge

Demand

Production and Cost

Market Structure

Pricing With Market Power

Economics of Strategy: Creating and Capturing Value

Economics of Strategy: Game Theory

Incentive Conflicts and Contracts

Organizational Architecture

Decision Rights: The Level of Empowerment

Decision Rights: Bundling Tasks Into Jobs and Subunits

Attracting and Retaining Qualified Employees

Incentive Compensation

Individual Performance Evaluation

Divisional Performance Evaluation

Corporate Governance

Vertical Integration and Outsourcing

Leadership: Motivating Change Within Organizations

Ethics and Organizational Architecture

Organizational Architecture and the Process of Management Innovation

Filters