Question 1

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 2

If one includes carbonated soft drinks, powdered soft drinks, bottled water, and juice drinks in the definition of the beverage industry, one is using a

Accepted Answer

A) broad market definition. 
B) medium market definition. 
C) narrow market definition. 
D) Department of Commerce market definition. 
E) Federal Trade Commission market definition. 
A) broad market definition. 
B) medium market definition. 
C) narrow market definition. 
D) Department of Commerce market definition. 
E) Federal Trade Commission market definition.

Question 3

If powdered soft drinks were perfect substitutes for carbonated soft drinks, then the demand curve for carbonated soft drinks would

Accepted Answer

A) be perfectly inelastic. 
B) have a price elasticity of 0.5. 
C) be perfectly elastic. 
D) have no price elasticity. 
E) have a unit-price elasticity. 
A) be perfectly inelastic. 
B) have a price elasticity of 0.5. 
C) be perfectly elastic. 
D) have no price elasticity. 
E) have a unit-price elasticity.

Question 4

After the increased regulation of the cable industry in 1993, many cable systems were allowed to raise prices. Give some possible explanations for this situation. If the provision of cable TV is not a natural monopoly, what could be expected regarding the number of firms and the profits of existing firms if the government deregulates?

Accepted Answer

Some explanations for increased cable pr

Question 5

The Herfindahl-Hirschman index increases with a narrower market definition.

Accepted Answer

A) True 
 B)False

Question 6

Frequently in American economic history, the government has regulated a firm's prices

Accepted Answer

A) even when it is farfetched to think of the firm as a natural monopoly. 
B) to force a firm to face intense competition at the beginning stages of its existence. 
C) to prevent international competition from capturing a market. 
D) to raise government revenue. 
E) to lower the cost of living. 
A) even when it is farfetched to think of the firm as a natural monopoly. 
B) to force a firm to face intense competition at the beginning stages of its existence. 
C) to prevent international competition from capturing a market. 
D) to raise government revenue. 
E) to lower the cost of living.

Question 7

There is more controversy among economists about the effects of vertical restraints than the effects of horizontal restraints.

Accepted Answer

A) True 
 B)False

Question 8

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 9

Antitrust policy attempts to prevent collusion among sellers and to prevent restraint of trade resulting from monopoly power.

Accepted Answer

A) True 
 B)False

Question 10

The Interstate Commerce Commission (ICC) began to stop regulating trucking in the 1990s.

Accepted Answer

A) True 
 B)False

Question 11

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

Question 12

The basis for breaking apart Standard Oil in 1911 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 13

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 14

When a clothing manufacturer merges with a retail clothing store chain, the merger is considered a

Accepted Answer

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

Question 15

According to the Federal Trade Commission merger guidelines, a merger is likely to be challenged if

Accepted Answer

A) the HHI after the merger is the same as the HHI before the merger. 
B) the HHI decreases after the merger. 
C) the HHI after the merger is above 1,000 and has increased. 
D) the HHI after the merger is above 1,800 and has increased by 50 points or more. 
E) the HHI after the merger is above 1,500 and has decreased. 
A) the HHI after the merger is the same as the HHI before the merger. 
B) the HHI decreases after the merger. 
C) the HHI after the merger is above 1,000 and has increased. 
D) the HHI after the merger is above 1,800 and has increased by 50 points or more. 
E) the HHI after the merger is above 1,500 and has decreased.

Question 16

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 17

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 18

Lawsuits against alleged price fixers can claim treble damages.

Accepted Answer

A) True 
 B)False

Question 19

Resale price maintenance is the situation in which a producer

Accepted Answer

A) sets a list price and does not allow the retailer to offer a discount. 
B) does not allow a retailer to sell goods made by a competing manufacturer. 
C) places no restrictions on a retailer's prices. 
D) limits the regions over which a retailer can sell a certain product. 
E) restrains trade horizontally. 
A) sets a list price and does not allow the retailer to offer a discount. 
B) does not allow a retailer to sell goods made by a competing manufacturer. 
C) places no restrictions on a retailer's prices. 
D) limits the regions over which a retailer can sell a certain product. 
E) restrains trade horizontally.

Question 20

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.

Exam 12: Antitrust Policy and Regulation

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

If one includes carbonated soft drinks, powdered soft drinks, bottled water, and juice drinks in the definition of the beverage industry, one is using a

If powdered soft drinks were perfect substitutes for carbonated soft drinks, then the demand curve for carbonated soft drinks would

The Herfindahl-Hirschman index increases with a narrower market definition.

Frequently in American economic history, the government has regulated a firm's prices

There is more controversy among economists about the effects of vertical restraints than the effects of horizontal restraints.

When regulators become captives of industry, firms and industry workers

Antitrust policy attempts to prevent collusion among sellers and to prevent restraint of trade resulting from monopoly power.

The Interstate Commerce Commission (ICC) began to stop regulating trucking in the 1990s.

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

The basis for breaking apart Standard Oil in 1911 was the

The government enforces laws against price fixing by

When a clothing manufacturer merges with a retail clothing store chain, the merger is considered a

According to the Federal Trade Commission merger guidelines, a merger is likely to be challenged if

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

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

Lawsuits against alleged price fixers can claim treble damages.

Resale price maintenance is the situation in which a producer

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

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of 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

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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