Question 1

"Cream skimming" usually results in

Accepted Answer

A) cross-subsidization of markets. 
B) subsidies to rural consumers of the service. 
C) regulations to provide universal service. 
D) monopoly. 
A) cross-subsidization of markets. 
B) subsidies to rural consumers of the service. 
C) regulations to provide universal service. 
D) monopoly. C

Question 2

Powers of many regulatory agencies are designed to protect public health and safety.

Accepted Answer

A) True 
 B)False  True

Question 3

The current deregulatory movement began to change laws to deregulation in the

Accepted Answer

A) early 1970s. 
B) late 1970s. 
C) early 1980s. 
D) early 1990s. 
A) early 1970s. 
B) late 1970s. 
C) early 1980s. 
D) early 1990s. B

Question 4

Antitrust laws prohibit undesirable business practices by firms holding monopoly power.

Accepted Answer

A) True 
 B)False

Question 5

Distinguish between predatory pricing strategy and bundling strategy.

Accepted Answer

Predatory pricing is pricing that threat

Question 6

In most industries, deregulation has led to lower prices.

Accepted Answer

A) True 
 B)False

Question 7

For the two industries with market shares listed below, which of the following would be true? Table 13-1

Accepted Answer

A) The concentration ratio would be the same for both industries but the HHI would be higher for Industry A. 
B) The concentration ratio would be the same for both industries but the HHI would be higher for Industry B. 
C) The HHI would be the same for both industries but the concentration ratio would be higher for Industry B. 
D) Both the concentration ratio and the HHI would be the same for both industries. 
A) The concentration ratio would be the same for both industries but the HHI would be higher for Industry A. 
B) The concentration ratio would be the same for both industries but the HHI would be higher for Industry B. 
C) The HHI would be the same for both industries but the concentration ratio would be higher for Industry B. 
D) Both the concentration ratio and the HHI would be the same for both industries.

Question 8

If a firm is a natural monopoly, society will benefit if it is broken into several small companies.

Accepted Answer

A) True 
 B)False

Question 9

Many regulated industries are not pure monopolies.

Accepted Answer

A) True 
 B)False

Question 10

High prices redistribute wealth from consumers to firms.

Accepted Answer

A) True 
 B)False

Question 11

If an industry consists of five firms each with a 20% market share, then the Herfindahl-Hirschman index would equal 1,600.

Accepted Answer

A) True 
 B)False

Question 12

If all large firms in the economy were broken into smaller firms, the result might be

Accepted Answer

A) decreased manufacturing efficiency in some industries. 
B) increased prices for some manufactured goods. 
C) decreased investment in research and development in some industries. 
D) All of the above are correct. 
A) decreased manufacturing efficiency in some industries. 
B) increased prices for some manufactured goods. 
C) decreased investment in research and development in some industries. 
D) All of the above are correct.

Question 13

Selling at a price that is only slightly above the firm's cost of production is called predatory pricing.

Accepted Answer

A) True 
 B)False

Question 14

Setting price equal to marginal cost in a natural monopoly will lead to

Accepted Answer

A) excess profits for the firm. 
B) losses for the firm. 
C) zero profits for the firm. 
D) One cannot tell without further information. 
A) excess profits for the firm. 
B) losses for the firm. 
C) zero profits for the firm. 
D) One cannot tell without further information.

Question 15

List appropriate criteria for deciding whether a merger of two firms producing similar products should be permitted.

Accepted Answer

Mergers that take place between two firm

Question 16

A monopoly firm operates with declining marginal cost.If regulators impose marginal cost pricing, the market will

Accepted Answer

A) remain a monopoly but behave like a perfectly competitive industry. 
B) become perfectly competitive. 
C) be entered by additional firms but will not necessarily become perfectly competitive. 
D) be exited by the existing firm if the regulators will let the firm leave the market. 
A) remain a monopoly but behave like a perfectly competitive industry. 
B) become perfectly competitive. 
C) be entered by additional firms but will not necessarily become perfectly competitive. 
D) be exited by the existing firm if the regulators will let the firm leave the market.

Question 17

A regulatory agency concerned with "universal service" must

Accepted Answer

A) prevent high profits in all markets. 
B) prevent entry in high-profit markets. 
C) prevent cross-subsidization. 
D) guarantee marginal cost pricing. 
A) prevent high profits in all markets. 
B) prevent entry in high-profit markets. 
C) prevent cross-subsidization. 
D) guarantee marginal cost pricing.

Question 18

Prices that maximize the public interest will always allow reasonable profits for firms.

Accepted Answer

A) True 
 B)False

Question 19

Airline deregulation led to the demise of many smaller airlines but large carriers were not materially affected.

Accepted Answer

A) True 
 B)False

Question 20

Firm A's motive in filing an antitrust suit against Firm B may be

Accepted Answer

A) to seek court protection against genuinely unfair practices by Firm B. 
B) to seek financial compensation for damages caused by Firm B. 
C) to create an expensive nuisance for Firm B. 
D) All of the above are correct. 
A) to seek court protection against genuinely unfair practices by Firm B. 
B) to seek financial compensation for damages caused by Firm B. 
C) to create an expensive nuisance for Firm B. 
D) All of the above are correct.

Exam 13: Limiting Market Power Regulation and Antitrust

"Cream skimming" usually results in

Powers of many regulatory agencies are designed to protect public health and safety.

The current deregulatory movement began to change laws to deregulation in the

Antitrust laws prohibit undesirable business practices by firms holding monopoly power.

Distinguish between predatory pricing strategy and bundling strategy.

In most industries, deregulation has led to lower prices.

For the two industries with market shares listed below, which of the following would be true? Table 13-1

If a firm is a natural monopoly, society will benefit if it is broken into several small companies.

Many regulated industries are not pure monopolies.

High prices redistribute wealth from consumers to firms.

If an industry consists of five firms each with a 20% market share, then the Herfindahl-Hirschman index would equal 1,600.

If all large firms in the economy were broken into smaller firms, the result might be

Selling at a price that is only slightly above the firm's cost of production is called predatory pricing.

Setting price equal to marginal cost in a natural monopoly will lead to

List appropriate criteria for deciding whether a merger of two firms producing similar products should be permitted.

A monopoly firm operates with declining marginal cost.If regulators impose marginal cost pricing, the market will

A regulatory agency concerned with "universal service" must

Prices that maximize the public interest will always allow reasonable profits for firms.

Airline deregulation led to the demise of many smaller airlines but large carriers were not materially affected.

Firm A's motive in filing an antitrust suit against Firm B may be

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand an Initial Look

Consumer Choice Individual and Market Demand

Demand and Elasticity

Production Inputs and Cost Building Blocks for Supply Analysis

Output Price and Profit the Importance of Marginal Analysis

Securities Business Finance and the Economy the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

The Case for Free Markets the Price System

The Shortcomings of Free Markets

Externalities the Environment and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship the Human Inputs

Poverty Inequality and Discrimination

Is Us Economic Leadership Threatened

International Trade and Comparative Advantage

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