Question 1

Draw a diagram for a firm in an industry in which the fixed costs are high and the marginal cost is low and constant.

Accepted Answer

In this industry, the firm will produce at the level at which MR = MC, Q_m and charge price P_m.

Question 2

Past regulation of the trucking industry was based on the premise that the industry was clearly a natural monopoly.

Accepted Answer

A) True 
 B)False  False

Question 3

A broader definition of a market implies

Accepted Answer

A)  a lower market concentration. 
B)  a higher Herfindahl-Hirschman index. 
C)  a higher price-cost margin. 
D)  a higher possibility of mergers. 
E)  a higher possibility of price fixing. 
A)  a lower market concentration. 
B)  a higher Herfindahl-Hirschman index. 
C)  a higher price-cost margin. 
D)  a higher possibility of mergers. 
E)  a higher possibility of price fixing. A

Question 4

The Herfindahl-Hirschman index is measured by

Accepted Answer

A)  adding the market shares of the four largest firms in an industry. 
B)  calculating the eight-firm concentration ratio for an industry. 
C)  summing the squares of the market shares of all firms in an industry. 
D)  calculating the four-firm concentration ratio for an industry. 
E)  squaring the sum of the market shares of all firms in an industry. 
A)  adding the market shares of the four largest firms in an industry. 
B)  calculating the eight-firm concentration ratio for an industry. 
C)  summing the squares of the market shares of all firms in an industry. 
D)  calculating the four-firm concentration ratio for an industry. 
E)  squaring the sum of the market shares of all firms in an industry.

Question 5

It has been suggested that it is always worth regulating a monopoly if doing so reduces the amount of deadweight loss. Comment.

Accepted Answer

One major problem with this co

Question 6

The Justice Department and the FTC have used economic analysis to develop a quantitative procedure to help define the extent of a market.

Accepted Answer

A) True 
 B)False

Question 7

A description of the types of goods and services offered and the geographic area of a market is called

Accepted Answer

A)  the large market concept. 
B)  competition. 
C)  a contestable market boundary. 
D)  territorial market boundary. 
E)  market definition. 
A)  the large market concept. 
B)  competition. 
C)  a contestable market boundary. 
D)  territorial market boundary. 
E)  market definition.

Question 8

When a court uses the rule of reason to interpret the Sherman Antitrust Act, its ruling is based on a firm's market share alone.

Accepted Answer

A) True 
 B)False

Question 9

A court decision forbidding resale price maintenance would mean that

Accepted Answer

A)  firms that were not horizontally integrated would not enjoy the advantages of horizontally integrated firms. 
B)  competition among producers would decrease. 
C)  competition among retailers would increase. 
D)  firms that were not vertically integrated would not enjoy the advantages of vertically integrated firms. 
E)  it would become profitable to merge horizontally. 
A)  firms that were not horizontally integrated would not enjoy the advantages of horizontally integrated firms. 
B)  competition among producers would decrease. 
C)  competition among retailers would increase. 
D)  firms that were not vertically integrated would not enjoy the advantages of vertically integrated firms. 
E)  it would become profitable to merge horizontally.

Question 10

Which of the following gives the government the authority to take action in breaking up an existing monopoly?

Accepted Answer

A)  Section 1 of the Sherman Act 
B)  Section 2 of the Sherman Act 
C)  The Clayton Act 
D)  The Glass-Steagall Act 
E)  The Federal Trade Commission Act 
A)  Section 1 of the Sherman Act 
B)  Section 2 of the Sherman Act 
C)  The Clayton Act 
D)  The Glass-Steagall Act 
E)  The Federal Trade Commission Act

Question 11

Price-fixing arrangements can take the form of an effort to restrict trade in one horizontal market.

Accepted Answer

A) True 
 B)False

Question 12

Price fixing is illegal in the United States.

Accepted Answer

A) True 
 B)False

Question 13

If the government sets the price equal to the natural monopoly's marginal cost, then the monopoly will earn a normal profit.

Accepted Answer

A) True 
 B)False

Question 14

Most economists agree that resale price maintenance reduces economic efficiency.

Accepted Answer

A) True 
 B)False

Question 15

The 1914 law aimed at preventing monopolies from forming through mergers is called the

Accepted Answer

A)  Clayton Antitrust Act. 
B)  Sherman Antitrust Act. 
C)  Celler-Kefauver Act. 
D)  Fair Labor Standards Act. 
E)  Robinson-Patman Act. 
A)  Clayton Antitrust Act. 
B)  Sherman Antitrust Act. 
C)  Celler-Kefauver Act. 
D)  Fair Labor Standards Act. 
E)  Robinson-Patman Act.

Question 16

When a firm uses average total cost pricing,

Accepted Answer

A)  above-normal profits are made. 
B)  economic profits equal zero. 
C)  there is not enough money to pay investors in the firm their opportunity costs. 
D)  price equals marginal cost. 
E)  there is not enough money to pay the managers. 
A)  above-normal profits are made. 
B)  economic profits equal zero. 
C)  there is not enough money to pay investors in the firm their opportunity costs. 
D)  price equals marginal cost. 
E)  there is not enough money to pay the managers.

Question 17

Antitrust policy includes all of the following except

Accepted Answer

A)  challenging and breaking up existing firms with significant market power. 
B)  preventing mergers that would increase monopoly power significantly. 
C)  limiting competitive arrangements between firms and their suppliers. 
D)  prohibiting price fixing. 
E)  prohibiting collusion. 
A)  challenging and breaking up existing firms with significant market power. 
B)  preventing mergers that would increase monopoly power significantly. 
C)  limiting competitive arrangements between firms and their suppliers. 
D)  prohibiting price fixing. 
E)  prohibiting collusion.

Question 18

Cable television

Accepted Answer

A)  has a high marginal cost. 
B)  should be regulated by the government. 
C)  faces no competition. 
D)  is a declining average total cost industry. 
E)  is unregulated. 
A)  has a high marginal cost. 
B)  should be regulated by the government. 
C)  faces no competition. 
D)  is a declining average total cost industry. 
E)  is unregulated.

Question 19

Resale price maintenance can never increase economic efficiency.

Accepted Answer

A) True 
 B)False

Question 20

A 1945 Supreme Court decision found Alcoa Aluminum guilty of monopolization.

Accepted Answer

A) True 
 B)False

Draw a diagram for a firm in an industry in which the fixed costs are high and the marginal cost is low and constant.

Past regulation of the trucking industry was based on the premise that the industry was clearly a natural monopoly.

A broader definition of a market implies

The Herfindahl-Hirschman index is measured by

It has been suggested that it is always worth regulating a monopoly if doing so reduces the amount of deadweight loss. Comment.

The Justice Department and the FTC have used economic analysis to develop a quantitative procedure to help define the extent of a market.

A description of the types of goods and services offered and the geographic area of a market is called

When a court uses the rule of reason to interpret the Sherman Antitrust Act, its ruling is based on a firm's market share alone.

A court decision forbidding resale price maintenance would mean that

Which of the following gives the government the authority to take action in breaking up an existing monopoly?

Price-fixing arrangements can take the form of an effort to restrict trade in one horizontal market.

Price fixing is illegal in the United States.

If the government sets the price equal to the natural monopoly's marginal cost, then the monopoly will earn a normal profit.

Most economists agree that resale price maintenance reduces economic efficiency.

The 1914 law aimed at preventing monopolies from forming through mergers is called the

When a firm uses average total cost pricing,

Antitrust policy includes all of the following except

Cable television

Resale price maintenance can never increase economic efficiency.

A 1945 Supreme Court decision found Alcoa Aluminum guilty of monopolization.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Filters

Exam 12: Antitrust Policy and Regulation

Draw a diagram for a firm in an industry in which the fixed costs are high and the marginal cost is low and constant.

Past regulation of the trucking industry was based on the premise that the industry was clearly a natural monopoly.

A broader definition of a market implies

The Herfindahl-Hirschman index is measured by

It has been suggested that it is always worth regulating a monopoly if doing so reduces the amount of deadweight loss. Comment.

The Justice Department and the FTC have used economic analysis to develop a quantitative procedure to help define the extent of a market.

A description of the types of goods and services offered and the geographic area of a market is called

When a court uses the rule of reason to interpret the Sherman Antitrust Act, its ruling is based on a firm's market share alone.

A court decision forbidding resale price maintenance would mean that

Which of the following gives the government the authority to take action in breaking up an existing monopoly?

Price-fixing arrangements can take the form of an effort to restrict trade in one horizontal market.

Price fixing is illegal in the United States.

If the government sets the price equal to the natural monopoly's marginal cost, then the monopoly will earn a normal profit.

Most economists agree that resale price maintenance reduces economic efficiency.

The 1914 law aimed at preventing monopolies from forming through mergers is called the

When a firm uses average total cost pricing,

Antitrust policy includes all of the following except

Cable television

Resale price maintenance can never increase economic efficiency.

A 1945 Supreme Court decision found Alcoa Aluminum guilty of monopolization.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Filters