Question 1

Whether cable television is a natural monopoly is controversial among economists.

Accepted Answer

A) True 
 B)False

Question 2

Should the government try to prevent a merger that would enable the resultant firm to produce at a more efficient scale of production?

Accepted Answer

Though a horizontal merger may enable ou

Question 3

In a natural monopoly, average total cost

Accepted Answer

A)  equals marginal cost over the entire range of production. 
B)  declines over the entire range of production. 
C)  is flat over a wide range of output. 
D)  increases over the entire range of production. 
E)  decreases for a small amount of output and then increases. 
A)  equals marginal cost over the entire range of production. 
B)  declines over the entire range of production. 
C)  is flat over a wide range of output. 
D)  increases over the entire range of production. 
E)  decreases for a small amount of output and then increases.

Question 4

A vertical merger has a smaller impact on market concentration than does a horizontal merger.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is false regarding a natural monopoly?

Accepted Answer

A)  The minimum efficient scale is larger than the size of the market. 
B)  The average total cost declines over the entire range of output. 
C)  One firm can supply the entire market at a lower cost than two firms can. 
D)  Fixed costs are very large compared to variable costs. 
E)  Diseconomies of scale exist at a very low output level. 
A)  The minimum efficient scale is larger than the size of the market. 
B)  The average total cost declines over the entire range of output. 
C)  One firm can supply the entire market at a lower cost than two firms can. 
D)  Fixed costs are very large compared to variable costs. 
E)  Diseconomies of scale exist at a very low output level.

Question 6

A natural monopoly can be regulated based on price, output, or profits.

Accepted Answer

A) True 
 B)False

Question 7

Government actions designed to promote competition among firms are called

Accepted Answer

A)  antitrust policy. 
B)  economic regulation. 
C)  incentive regulation. 
D)  government regulation. 
E)  monopoly policy. 
A)  antitrust policy. 
B)  economic regulation. 
C)  incentive regulation. 
D)  government regulation. 
E)  monopoly policy.

Question 8

Under incentive regulation, a natural monopoly

Accepted Answer

A)  can raise its price if its average total cost rises above its regulated price. 
B)  cannot distribute some profits to a worker whose innovation lowered the firm's average total cost. 
C)  must lower its price if its average total cost falls below its regulated price. 
D)  would strive to achieve average total cost lower than the regulated price. 
E)  can disregard sloppy work or less innovative management. 
A)  can raise its price if its average total cost rises above its regulated price. 
B)  cannot distribute some profits to a worker whose innovation lowered the firm's average total cost. 
C)  must lower its price if its average total cost falls below its regulated price. 
D)  would strive to achieve average total cost lower than the regulated price. 
E)  can disregard sloppy work or less innovative management.

Question 9

Regarding the provision of a public utility like water,

Accepted Answer

A)  many small firms can deliver the water to households most efficiently. 
B)  a state-owned firm can deliver the water to households most efficiently. 
C)  two firms can deliver the water to households most efficiently. 
D)  a few large firms can deliver the water to households most efficiently. 
E)  one firm can deliver the water to households most efficiently. 
A)  many small firms can deliver the water to households most efficiently. 
B)  a state-owned firm can deliver the water to households most efficiently. 
C)  two firms can deliver the water to households most efficiently. 
D)  a few large firms can deliver the water to households most efficiently. 
E)  one firm can deliver the water to households most efficiently.

Question 10

A regulatory method that stipulates that the firm charge a price that equals average total cost is called

Accepted Answer

A)  average total cost pricing. 
B)  marginal cost pricing. 
C)  incentive regulation. 
D)  marginal-revenue-equals-marginal-cost pricing. 
E)  average variable cost pricing. 
A)  average total cost pricing. 
B)  marginal cost pricing. 
C)  incentive regulation. 
D)  marginal-revenue-equals-marginal-cost pricing. 
E)  average variable cost pricing.

Question 11

The type of merger that increases the degree of concentration the most is a

Accepted Answer

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

Question 12

A region over which a manufacturer limits the distribution or selling of its products to one retailer or wholesaler is called a(n)

Accepted Answer

A)  uncontested market. 
B)  exclusive territory. 
C)  captured territory. 
D)  strategic market territory. 
E)  inclusive territory. 
A)  uncontested market. 
B)  exclusive territory. 
C)  captured territory. 
D)  strategic market territory. 
E)  inclusive territory.

Question 13

A serious problem with average total cost pricing is that

Accepted Answer

A)  the deadweight loss to society is greater than with unregulated monopoly pricing. 
B)  the firm has no incentive to earn a profit. 
C)  the deadweight loss to society is the same as with unregulated monopoly pricing. 
D)  inefficiencies in the firm will not be tolerated. 
E)  the firm has no incentive to reduce costs. 
A)  the deadweight loss to society is greater than with unregulated monopoly pricing. 
B)  the firm has no incentive to earn a profit. 
C)  the deadweight loss to society is the same as with unregulated monopoly pricing. 
D)  inefficiencies in the firm will not be tolerated. 
E)  the firm has no incentive to reduce costs.

Question 14

Suppose that Industry A has two firms of the same size and Industry B has three firms with 65 percent, 30 percent, and 5 percent market shares, respectively. Which of the following is true of the Herfindahl-Hirschman indexes for the two industries?

Accepted Answer

A)  The HHI for Industry A is 50 higher than the HHI for Industry B. 
B)  The HHI for Industry A is 50 lower than the HHI for Industry B. 
C)  The HHI for Industry A is 150 higher than the HHI for Industry B. 
D)  The HHI for Industry A is 150 lower than the HHI for Industry B. 
E)  The HHI is the same for both industries. 
A)  The HHI for Industry A is 50 higher than the HHI for Industry B. 
B)  The HHI for Industry A is 50 lower than the HHI for Industry B. 
C)  The HHI for Industry A is 150 higher than the HHI for Industry B. 
D)  The HHI for Industry A is 150 lower than the HHI for Industry B. 
E)  The HHI is the same for both industries.

Question 15

Trucking rates rose after the Interstate Commerce Commission (ICC) stopped regulating trucking in the 1970s and early 1980s.

Accepted Answer

A) True 
 B)False

Question 16

Antitrust policy began in the United States just over 100 years ago in response to

Accepted Answer

A)  predatory pricing on the part of small retailers. 
B)  a massive breaking up of existing firms. 
C)  massive waves of immigration into the country. 
D)  the development of contestable markets. 
E)  a massive wave of mergers and consolidations among firms. 
A)  predatory pricing on the part of small retailers. 
B)  a massive breaking up of existing firms. 
C)  massive waves of immigration into the country. 
D)  the development of contestable markets. 
E)  a massive wave of mergers and consolidations among firms.

Question 17

Allowing a natural monopoly to exist is more efficient than breaking it into several smaller firms.

Accepted Answer

A) True 
 B)False

Question 18

In a natural monopoly, average total cost is less than marginal cost throughout the entire range of the market demand.

Accepted Answer

A) True 
 B)False

Question 19

Zenith lost, and Matsushita and other Japanese companies won, a 1986 Supreme Court predatory pricing decision because

Accepted Answer

A)  the Court's majority opinion stated that the predatory pricing case appeared to make "no economic sense." 
B)  the Japanese companies charged higher prices than Zenith. 
C)  the Court ruled that the Japanese companies were not competing vigorously against Zenith. 
D)  the Japanese companies' share of the U.S. market was too large for them to predatory-price. 
E)  foreign companies are exempt from antitrust regulations. 
A)  the Court's majority opinion stated that the predatory pricing case appeared to make "no economic sense." 
B)  the Japanese companies charged higher prices than Zenith. 
C)  the Court ruled that the Japanese companies were not competing vigorously against Zenith. 
D)  the Japanese companies' share of the U.S. market was too large for them to predatory-price. 
E)  foreign companies are exempt from antitrust regulations.

Question 20

The 1986 Supreme Court decision in Matsushita v. Zenith has made predatory pricing more difficult to prove.

Accepted Answer

A) True 
 B)False

Whether cable television is a natural monopoly is controversial among economists.

Should the government try to prevent a merger that would enable the resultant firm to produce at a more efficient scale of production?

In a natural monopoly, average total cost

A vertical merger has a smaller impact on market concentration than does a horizontal merger.

Which of the following statements is false regarding a natural monopoly?

A natural monopoly can be regulated based on price, output, or profits.

Government actions designed to promote competition among firms are called

Under incentive regulation, a natural monopoly

Regarding the provision of a public utility like water,

A regulatory method that stipulates that the firm charge a price that equals average total cost is called

The type of merger that increases the degree of concentration the most is a

A region over which a manufacturer limits the distribution or selling of its products to one retailer or wholesaler is called a(n)

A serious problem with average total cost pricing is that

Suppose that Industry A has two firms of the same size and Industry B has three firms with 65 percent, 30 percent, and 5 percent market shares, respectively. Which of the following is true of the Herfindahl-Hirschman indexes for the two industries?

Trucking rates rose after the Interstate Commerce Commission (ICC) stopped regulating trucking in the 1970s and early 1980s.

Antitrust policy began in the United States just over 100 years ago in response to

Allowing a natural monopoly to exist is more efficient than breaking it into several smaller firms.

In a natural monopoly, average total cost is less than marginal cost throughout the entire range of the market demand.

Zenith lost, and Matsushita and other Japanese companies won, a 1986 Supreme Court predatory pricing decision because

The 1986 Supreme Court decision in Matsushita v. Zenith has made predatory pricing more difficult to prove.

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

Whether cable television is a natural monopoly is controversial among economists.

Should the government try to prevent a merger that would enable the resultant firm to produce at a more efficient scale of production?

In a natural monopoly, average total cost

A vertical merger has a smaller impact on market concentration than does a horizontal merger.

Which of the following statements is false regarding a natural monopoly?

A natural monopoly can be regulated based on price, output, or profits.

Government actions designed to promote competition among firms are called

Under incentive regulation, a natural monopoly

Regarding the provision of a public utility like water,

A regulatory method that stipulates that the firm charge a price that equals average total cost is called

The type of merger that increases the degree of concentration the most is a

A region over which a manufacturer limits the distribution or selling of its products to one retailer or wholesaler is called a(n)

A serious problem with average total cost pricing is that

Suppose that Industry A has two firms of the same size and Industry B has three firms with 65 percent, 30 percent, and 5 percent market shares, respectively. Which of the following is true of the Herfindahl-Hirschman indexes for the two industries?

Trucking rates rose after the Interstate Commerce Commission (ICC) stopped regulating trucking in the 1970s and early 1980s.

Antitrust policy began in the United States just over 100 years ago in response to

Allowing a natural monopoly to exist is more efficient than breaking it into several smaller firms.

In a natural monopoly, average total cost is less than marginal cost throughout the entire range of the market demand.

Zenith lost, and Matsushita and other Japanese companies won, a 1986 Supreme Court predatory pricing decision because

The 1986 Supreme Court decision in Matsushita v. Zenith has made predatory pricing more difficult to prove.

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