Question 1

When the legislature allows a public utility to receive a fair-return price, the firm can charge a price high enough to cover

Accepted Answer

A)  average total cost 
B)  average variable cost 
C)  average fixed cost 
D)  marginal cost

Question 2

Market failure occurs when ABC Chemical Co. does not take into account spillover costs. Therefore, the firm produces

Accepted Answer

A)  too little output and charges too low a price 
B)  too little output and charges too high a price 
C)  too much output and charges too low a price 
D)  too much output and charges too nigh a price

Question 3

All industries in the United States are subject to the provisions of the Sherman Act and Clayton Act.

Accepted Answer

A) True 
 B)False

Question 4

______ regulation is intended to correct a variety of undesirable side effects in a market economy that relate to the environment, safety, and health.

Accepted Answer

A)  Antitrust 
B)  Antimonopoly 
C)  Economic 
D)  Social

Question 5

Concerning governmental regulation of pollution, command-and-control regulations suffer from all of the following problems except

Accepted Answer

A)  assigning the proper excise tax to discourage pollution 
B)  being subject to enforcement procedures that are costly for the taxpayer 
C)  regulators not having detailed knowledge of production facilities and processes 
D)  regulators not being aware of alternative methods of pollution abatement

Question 6

In the past, economic regulation has been used to control the prices, standards of service, and conditions of entry in all of the following industries except

Accepted Answer

A)  energy 
B)  airlines 
C)  trucking 
D)  computers

Question 7

If the Florida Power Co. is a natural monopoly, government policies that break it up would

Accepted Answer

A)  limit the ability of the firm to realize economies of large-scale production 
B)  force the firm to realize diseconomies of large-scale production 
C)  ensure that the firm would realize economic profits 
D)  prevent the firm from realizing economic profits

Question 8

The market system fails by under-producing public goods.

Accepted Answer

A) True 
 B)False

Question 9

The Clayton Act was needed to

Accepted Answer

A)  follow up the Sherman Act by detailing the specific actions that would be considered illegal 
B)  follow up the Sherman Act by stating what would happen to firms that violated antitrust laws 
C)  provide a cornerstone to antitrust law, which would later be built upon by the Sherman Act 
D)  overturn and replace the Sherman Act

Question 10

The ______ broadened the Sherman Act and outlawed specific business practices that resulted in a substantial lessening of competition-price discrimination, mergers, tying contracts, and interlocking directorates

Accepted Answer

A)  Wilson Act 
B)  McKinley Act 
C)  Clayton Act 
D)  Nelson Act

Question 11

All of the following are sources of market failure except

Accepted Answer

A)  private goods 
B)  public goods 
C)  spillover costs 
D)  spillover benefits

Question 12

The Justice Department attempted to break up Microsoft Corp. because it felt the company had used its monopoly power to engage in anticompetitive business practices.

Accepted Answer

A) True 
 B)False

Question 13

Given the same costs, a competitive market maximizes profit by selling a ______ output and charging a ______ price than would a monopolist.

Accepted Answer

A)  larger, higher 
B)  larger, lower 
C)  smaller, higher 
D)  smaller, lower

Question 14

Education is an activity that is considered to

Accepted Answer

A)  have spillover costs 
B)  have spillover benefits 
C)  be a private good 
D)  be required under the Sherman Act

Question 15

U.S. public policy toward public utilities, such as gas and electric companies, has generally allowed them to operate as

Accepted Answer

A)  private monopolies without government regulation of price and output 
B)  private monopolies subject to government regulation of price and output 
C)  firms owned and operated by the federal government 
D)  firms owned and operated by state governments

Question 16

When someone buys a used car and finds out later that it has defects that were not disclosed, this is a form of market failure.

Accepted Answer

A) True 
 B)False

Question 17

Concerning public utilities, legislatures have traditionally allowed a regulated firm to receive a price that

Accepted Answer

A)  provides an economic profit of 25 percent of invested capital 
B)  provides an economic profit of 15 percent of invested capital 
C)  covers average variable cost, but not average total cost 
D)  covers average fixed cost plus average variable cost

Question 18

Brookings Institution researchers have found that sports stadiums provide a big boost to employment and personal income to residents of local communities.

Accepted Answer

A) True 
 B)False

Question 19

If there are spillover benefits associated with individuals receiving their annual flu shots, then the government can improve the free market outcome by subsidizing the cost of flu shots to consumers.

Accepted Answer

The answer of If there are spillover benefits associated with...

Question 20

In the past, economic regulation has been used to control the prices, standards of service, and conditions of entry in all of the following industries except

Accepted Answer

A)  automobiles 
B)  railroads 
C)  communications 
D)  trucking

Exam 8: Government and Markets

When the legislature allows a public utility to receive a fair-return price, the firm can charge a price high enough to cover

Market failure occurs when ABC Chemical Co. does not take into account spillover costs. Therefore, the firm produces

All industries in the United States are subject to the provisions of the Sherman Act and Clayton Act.

______ regulation is intended to correct a variety of undesirable side effects in a market economy that relate to the environment, safety, and health.

Concerning governmental regulation of pollution, command-and-control regulations suffer from all of the following problems except

In the past, economic regulation has been used to control the prices, standards of service, and conditions of entry in all of the following industries except

If the Florida Power Co. is a natural monopoly, government policies that break it up would

The market system fails by under-producing public goods.

The Clayton Act was needed to

The ______ broadened the Sherman Act and outlawed specific business practices that resulted in a substantial lessening of competition-price discrimination, mergers, tying contracts, and interlocking directorates

All of the following are sources of market failure except

The Justice Department attempted to break up Microsoft Corp. because it felt the company had used its monopoly power to engage in anticompetitive business practices.

Given the same costs, a competitive market maximizes profit by selling a output and charging a price than would a monopolist.

Education is an activity that is considered to

U.S. public policy toward public utilities, such as gas and electric companies, has generally allowed them to operate as

When someone buys a used car and finds out later that it has defects that were not disclosed, this is a form of market failure.

Concerning public utilities, legislatures have traditionally allowed a regulated firm to receive a price that

Brookings Institution researchers have found that sports stadiums provide a big boost to employment and personal income to residents of local communities.

If there are spillover benefits associated with individuals receiving their annual flu shots, then the government can improve the free market outcome by subsidizing the cost of flu shots to consumers.

In the past, economic regulation has been used to control the prices, standards of service, and conditions of entry in all of the following industries except