Question 1

Producers can make regulatory agencies their captives in order to reduce market competition.

Accepted Answer

A) True 
 B)False

Question 2

A firm's action to set a price below its shutdown point with the intent to drive a competitor out of business is called

Accepted Answer

A)  hostile takeover. 
B)  lowering the firm's price-cost margin. 
C)  predatory pricing. 
D)  price discrimination. 
E)  a contestable market action. 
A)  hostile takeover. 
B)  lowering the firm's price-cost margin. 
C)  predatory pricing. 
D)  price discrimination. 
E)  a contestable market action.

Question 3

Under incentive regulation, if a regulated natural monopoly achieves average total cost lower than the regulated price, it can

Accepted Answer

A)  trade the extra profits for other regulatory leniencies. 
B)  be exposed to a higher tax. 
C)  decrease its output. 
D)  keep the extra profits. 
E)  increase its output. 
A)  trade the extra profits for other regulatory leniencies. 
B)  be exposed to a higher tax. 
C)  decrease its output. 
D)  keep the extra profits. 
E)  increase its output.

Question 4

A vertical merger will seldom reduce competition if

Accepted Answer

A)  there is exclusive dealing in the market. 
B)  the merger occurs at the raw materials stage of production. 
C)  there are other firms competing at each level of production. 
D)  there is resale price maintenance in the market. 
E)  the merged firm competes only in prices. 
A)  there is exclusive dealing in the market. 
B)  the merger occurs at the raw materials stage of production. 
C)  there are other firms competing at each level of production. 
D)  there is resale price maintenance in the market. 
E)  the merged firm competes only in prices.

Question 5

The first antitrust law in the United States was the

Accepted Answer

A)  Clayton Antitrust Act. 
B)  Sherman Antitrust Act. 
C)  Celler-Kefauver Act. 
D)  Robinson-Patman Act. 
E)  Glass-Steagall Act. 
A)  Clayton Antitrust Act. 
B)  Sherman Antitrust Act. 
C)  Celler-Kefauver Act. 
D)  Robinson-Patman Act. 
E)  Glass-Steagall Act.

Question 6

When regulators become captives of industry, firms and industry workers

Accepted Answer

A)  have a tendency to seek union representation. 
B)  receive more than their proportionate share of the regulatory benefits. 
C)  take actions to increase benefits to the public. 
D)  cannot affect congressional representatives except through the ballot box. 
E)  receive short shrift when it comes to sharing the regulatory benefits. 
A)  have a tendency to seek union representation. 
B)  receive more than their proportionate share of the regulatory benefits. 
C)  take actions to increase benefits to the public. 
D)  cannot affect congressional representatives except through the ballot box. 
E)  receive short shrift when it comes to sharing the regulatory benefits.

Question 7

In order to reduce the deadweight loss of a natural monopoly, the government can regulate the price such that it is below marginal cost.

Accepted Answer

A) True 
 B)False

Question 8

There is reason to regulate the prices of firms in industries that

Accepted Answer

A)  are strategically important to the country. 
B)  are natural monopolies. 
C)  have potential external costs for the country as a whole. 
D)  are usually regulated by regulatory authorities. 
E)  produce public goods. 
A)  are strategically important to the country. 
B)  are natural monopolies. 
C)  have potential external costs for the country as a whole. 
D)  are usually regulated by regulatory authorities. 
E)  produce public goods.

Question 9

Price fixing is illegal under the per se rule outlined in Section 1 of the Sherman Act.

Accepted Answer

A) True 
 B)False

Question 10

Predatory pricing interpretations are now well established, and new court rulings are unlikely to change them.

Accepted Answer

A) True 
 B)False

Question 11

The average cost curve of a natural monopoly

Accepted Answer

A)  is upward-sloping. 
B)  is downward-sloping. 
C)  is horizontal. 
D)  has an inverted U-shape. 
E)  is vertical. 
A)  is upward-sloping. 
B)  is downward-sloping. 
C)  is horizontal. 
D)  has an inverted U-shape. 
E)  is vertical.

Question 12

The government enforces laws against price fixing by

Accepted Answer

A)  putting the alleged price fixers out of business but not confiscating their assets. 
B)  regulating prices for a certain period of time. 
C)  ordering the alleged price fixers to stop fixing prices. 
D)  confiscating the assets of the alleged price fixers. 
E)  bringing lawsuits against the alleged price fixers. 
A)  putting the alleged price fixers out of business but not confiscating their assets. 
B)  regulating prices for a certain period of time. 
C)  ordering the alleged price fixers to stop fixing prices. 
D)  confiscating the assets of the alleged price fixers. 
E)  bringing lawsuits against the alleged price fixers.

Question 13

What is the name of the antitrust case standard that requires a court to consider the rationale for the offending practice and its effect on competition?

Accepted Answer

A)  Rule of reason 
B)  Antimonopoly rule 
C)  Predatory pricing rule 
D)  Per se rule 
E)  Antidiscrimination 
A)  Rule of reason 
B)  Antimonopoly rule 
C)  Predatory pricing rule 
D)  Per se rule 
E)  Antidiscrimination

Question 14

Marginal cost pricing is a regulatory method that stipulates that the firm charge a price equal to

Accepted Answer

A)  deadweight loss. 
B)  marginal cost. 
C)  average cost. 
D)  marginal revenue. 
E)  fixed cost. 
A)  deadweight loss. 
B)  marginal cost. 
C)  average cost. 
D)  marginal revenue. 
E)  fixed cost.

Question 15

The type of merger that will most likely reduce market competition is a horizontal merger.

Accepted Answer

A) True 
 B)False

Question 16

The combining of two firms, one of which supplies goods to the other, is called a

Accepted Answer

A)  conglomerate merger. 
B)  horizontal merger. 
C)  competitive merger. 
D)  cartel. 
E)  vertical merger. 
A)  conglomerate merger. 
B)  horizontal merger. 
C)  competitive merger. 
D)  cartel. 
E)  vertical merger.

Question 17

An incentive-regulated firm can mislead the regulator by

Accepted Answer

A)  saying that its marginal cost is lower than it actually is, in order to get a higher price. 
B)  asking to charge the marginal cost price. 
C)  hiring the best lawyers to lobby the regulator. 
D)  saying that its average total cost is higher than it actually is, in order to get a higher price. 
E)  asking to charge the average cost price. 
A)  saying that its marginal cost is lower than it actually is, in order to get a higher price. 
B)  asking to charge the marginal cost price. 
C)  hiring the best lawyers to lobby the regulator. 
D)  saying that its average total cost is higher than it actually is, in order to get a higher price. 
E)  asking to charge the average cost price.

Question 18

One of the most famous price-fixing cases in U.S. history occurred in the 1950s and involved

Accepted Answer

A)  Alcoa and Reynolds Aluminum Company. 
B)  General Motors and Ford. 
C)  Westinghouse and General Electric. 
D)  IBM and Digital Equipment Company. 
E)  American Airlines and United Airlines. 
A)  Alcoa and Reynolds Aluminum Company. 
B)  General Motors and Ford. 
C)  Westinghouse and General Electric. 
D)  IBM and Digital Equipment Company. 
E)  American Airlines and United Airlines.

Question 19

A 1,000-point change in the Herfindahl-Hirschman index corresponds roughly to a merger of two firms, each with a 7 percent share of the market.

Accepted Answer

A) True 
 B)False

Question 20

Price fixing is the practice of charging the same price for a product to all customers.

Accepted Answer

A) True 
 B)False

Producers can make regulatory agencies their captives in order to reduce market competition.

A firm's action to set a price below its shutdown point with the intent to drive a competitor out of business is called

Under incentive regulation, if a regulated natural monopoly achieves average total cost lower than the regulated price, it can

A vertical merger will seldom reduce competition if

The first antitrust law in the United States was the

When regulators become captives of industry, firms and industry workers

In order to reduce the deadweight loss of a natural monopoly, the government can regulate the price such that it is below marginal cost.

There is reason to regulate the prices of firms in industries that

Price fixing is illegal under the per se rule outlined in Section 1 of the Sherman Act.

Predatory pricing interpretations are now well established, and new court rulings are unlikely to change them.

The average cost curve of a natural monopoly

The government enforces laws against price fixing by

What is the name of the antitrust case standard that requires a court to consider the rationale for the offending practice and its effect on competition?

Marginal cost pricing is a regulatory method that stipulates that the firm charge a price equal to

The type of merger that will most likely reduce market competition is a horizontal merger.

The combining of two firms, one of which supplies goods to the other, is called a

An incentive-regulated firm can mislead the regulator by

One of the most famous price-fixing cases in U.S. history occurred in the 1950s and involved

A 1,000-point change in the Herfindahl-Hirschman index corresponds roughly to a merger of two firms, each with a 7 percent share of the market.

Price fixing is the practice of charging the same price for a product to all customers.

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

Producers can make regulatory agencies their captives in order to reduce market competition.

A firm's action to set a price below its shutdown point with the intent to drive a competitor out of business is called

Under incentive regulation, if a regulated natural monopoly achieves average total cost lower than the regulated price, it can

A vertical merger will seldom reduce competition if

The first antitrust law in the United States was the

When regulators become captives of industry, firms and industry workers

In order to reduce the deadweight loss of a natural monopoly, the government can regulate the price such that it is below marginal cost.

There is reason to regulate the prices of firms in industries that

Price fixing is illegal under the per se rule outlined in Section 1 of the Sherman Act.

Predatory pricing interpretations are now well established, and new court rulings are unlikely to change them.

The average cost curve of a natural monopoly

The government enforces laws against price fixing by

What is the name of the antitrust case standard that requires a court to consider the rationale for the offending practice and its effect on competition?

Marginal cost pricing is a regulatory method that stipulates that the firm charge a price equal to

The type of merger that will most likely reduce market competition is a horizontal merger.

The combining of two firms, one of which supplies goods to the other, is called a

An incentive-regulated firm can mislead the regulator by

One of the most famous price-fixing cases in U.S. history occurred in the 1950s and involved

A 1,000-point change in the Herfindahl-Hirschman index corresponds roughly to a merger of two firms, each with a 7 percent share of the market.

Price fixing is the practice of charging the same price for a product to all customers.

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