Question 1

The problem generally associated 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 2

A monopolist sets prices above the competitive price and output below the competitive output level.Some customers are willing to pay more than marginal cost,yet do not receive the product.Thus:

Accepted Answer

A) not all gains from trade are exhausted. 
B) all gains from trade are exhausted. 
C) it is clear that monopolists do not maximize profits. 
D) it is clear that monopolists experience decreasing returns to scale. 
A) not all gains from trade are exhausted. 
B) all gains from trade are exhausted. 
C) it is clear that monopolists do not maximize profits. 
D) it is clear that monopolists experience decreasing returns to scale.

Question 3

A firm can reduce its expected legal costs by negotiating an advance pricing agreement (APA)with the IRS.However,filing an APA can expose the firm to considerable risk by giving the government access to its sensitive cost-related information.This is an example of the _____ that arise due to regulation.:

Accepted Answer

A) information asymmetries 
B) opportunity costs 
C) positive externalities 
D) legal costs 
A) information asymmetries 
B) opportunity costs 
C) positive externalities 
D) legal costs

Question 4

Which of the following is true in a regulatory environment?

Accepted Answer

A) The number of consumers is large,and their individual payoffs from successful lobbying are also large. 
B) The number of consumers is large,and their individual payoffs from successful lobbying are small. 
C) The demand for regulation is perfectly inelastic. 
D) The supply of regulation is usually tied to another industry's success. 
A) The number of consumers is large,and their individual payoffs from successful lobbying are also large. 
B) The number of consumers is large,and their individual payoffs from successful lobbying are small. 
C) The demand for regulation is perfectly inelastic. 
D) The supply of regulation is usually tied to another industry's success.

Question 5

Between 1971 and 1991,more than _________ federal lawsuits were filed.

Accepted Answer

A) 10 million 
B) 6 million 
C) 3 million 
D) 4 million 
A) 10 million 
B) 6 million 
C) 3 million 
D) 4 million

Question 6

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,places WM at a competitive disadvantage as its major competitor has 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 stand

Question 7

In the case of completely unorganized and ill-informed consumers,the political support function:

Accepted Answer

A) becomes horizontal. 
B) bends forward. 
C) becomes vertical. 
D) bends backward. 
A) becomes horizontal. 
B) bends forward. 
C) becomes vertical. 
D) bends backward.

Question 8

Describe the lemons problem.

Accepted Answer

Suppose the average resale price for 1-y

Question 9

Which of the following results in the transfer of wealth from consumers to producers?

Accepted Answer

A) Provision of efficiency wages 
B) Licensing of doctors and dentists 
C) Provision of compensating wage differentials 
D) Internalization of externalities 
A) Provision of efficiency wages 
B) Licensing of doctors and dentists 
C) Provision of compensating wage differentials 
D) Internalization of externalities

Question 10

As a firm moves from a competitive industry to a monopoly:

Accepted Answer

A) its profits fall. 
B) average revenue falls and profits rise. 
C) marginal costs rise and profits fall. 
D) its profits rise. 
A) its profits fall. 
B) average revenue falls and profits rise. 
C) marginal costs rise and profits fall. 
D) its profits rise.

Question 11

Many people believe that the supply and demand for regulation in an industry often results in the creation of a powerful coalition group controlling the regulatory body.That powerful group often comprises of executives from the same industry that is supposed to be regulated.This is called:

Accepted Answer

A) capturing. 
B) adverse selection. 
C) internalization of externalities. 
D) free-riding. 
A) capturing. 
B) adverse selection. 
C) internalization of externalities. 
D) free-riding.

Question 12

The Occupational Safety and Health Administration (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) uniform globally. 
B) inalienable. 
C) negotiable. 
D) transferable. 
A) uniform globally. 
B) inalienable. 
C) negotiable. 
D) transferable.

Question 13

The idea that resource allocation can remain efficient,even in the presence of externalities,as long as property rights are clearly assigned and transaction 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 14

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 they encourage monopolistic competition. 
B) favor these restrictions since they promote inventive activities. 
C) prefer high tax rates to patents. 
D) prefer low prices to patents. 
A) generally oppose these restrictions as they encourage monopolistic competition. 
B) favor these restrictions since they promote inventive activities. 
C) prefer high tax rates to patents. 
D) prefer low prices to patents.

Question 15

Which of these is true of political coalitions?

Accepted Answer

A) Political coalitions are similar to the coalitions formed between oligopolistic firms. 
B) Political coalitions are synonymous to political regulations. 
C) Members of a political coalition are usually risk lovers. 
D) Members of a political coalition are usually risk-averse. 
A) Political coalitions are similar to the coalitions formed between oligopolistic firms. 
B) Political coalitions are synonymous to political regulations. 
C) Members of a political coalition are usually risk lovers. 
D) Members of a political coalition are usually risk-averse.

Question 16

A jury ordered McDonald's to pay $2.7 million to Stella Liebeck,a drive-through customer who burned herself with hot coffee after placing the cup between her legs to remove the top and add cream.She claimed that the coffee was too hot.This tells us that our legal system can:

Accepted Answer

A) promote efficiency by making property rights secure. 
B) promote efficiency by lowering transaction costs. 
C) lower costs by creating incentives to litigate frivolous suits. 
D) raise costs by creating incentives to litigate frivolous suits. 
A) promote efficiency by making property rights secure. 
B) promote efficiency by lowering transaction costs. 
C) lower costs by creating incentives to litigate frivolous suits. 
D) raise costs by creating incentives to litigate frivolous suits.

Question 17

The economic theory of regulation treats politicians as:

Accepted Answer

A) public-spirited individuals who work for 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 minority segment of the population. 
A) public-spirited individuals who work for 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 minority segment of the population.

Question 18

Explain how Coase's theorem is implemented by the Environmental Protection Agency (EPA).

Accepted Answer

According to Ronald Coase,externalities

Question 19

In developed countries,if property rights are enforced and contracts in trade are legally respected,it is usually assumed that:

Accepted Answer

A) output will begin to fall. 
B) investment will be encouraged. 
C) transaction costs will be zero. 
D) government intervention will be unnecessary. 
A) output will begin to fall. 
B) investment will be encouraged. 
C) transaction costs will be zero. 
D) government intervention will be unnecessary.

Question 20

In developed countries,the enforcement of contracts and the adjudication of contract disputes through the court system:

Accepted Answer

A) reduces the volume of international trade. 
B) lowers the comparative advantage enjoyed by producers. 
C) is an important way to reduce transaction costs. 
D) weakens the system of property rights. 
A) reduces the volume of international trade. 
B) lowers the comparative advantage enjoyed by producers. 
C) is an important way to reduce transaction costs. 
D) weakens the system of property rights.

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

The problem generally associated with public goods is:

A monopolist sets prices above the competitive price and output below the competitive output level.Some customers are willing to pay more than marginal cost,yet do not receive the product.Thus:

Which of the following is true in a regulatory environment?

Between 1971 and 1991,more than _________ federal lawsuits were filed.

In the case of completely unorganized and ill-informed consumers,the political support function:

Describe the lemons problem.

Which of the following results in the transfer of wealth from consumers to producers?

As a firm moves from a competitive industry to a monopoly:

Many people believe that the supply and demand for regulation in an industry often results in the creation of a powerful coalition group controlling the regulatory body.That powerful group often comprises of executives from the same industry that is supposed to be regulated.This is called:

The Occupational Safety and Health Administration (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:

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

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

Which of these is true of political coalitions?

A jury ordered McDonald's to pay $2.7 million to Stella Liebeck,a drive-through customer who burned herself with hot coffee after placing the cup between her legs to remove the top and add cream.She claimed that the coffee was too hot.This tells us that our legal system can:

The economic theory of regulation treats politicians as:

Explain how Coase's theorem is implemented by the Environmental Protection Agency (EPA).

In developed countries,if property rights are enforced and contracts in trade are legally respected,it is usually assumed that:

In developed countries,the enforcement of contracts and the adjudication of contract disputes through the court system:

Introduction

Economists View of Behavior

Exchange and Markets

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