Question 1

When regulators identify with the special interests of the industry they regulate, this behavior conforms with the

Accepted Answer

A) share-the-gains, share-the-pains hypothesis. 
B) rate-of-return hypothesis. 
C) lemon market hypothesis. 
D) capture hypothesis. 
A) share-the-gains, share-the-pains hypothesis. 
B) rate-of-return hypothesis. 
C) lemon market hypothesis. 
D) capture hypothesis. D

Question 2

Which of the following is a possible market solution to the lemons problem?

Accepted Answer

A) Producers might offer product guarantees and warranties. 
B) Producers might be required to meet certain legal standards to obtain licenses granting the right to sell their products. 
C) Government agencies might be charged with directly overseeing production and distribution of certain products. 
D) Liability laws might be established to ensure that firms selling certain products must face penalties in the event the products function poorly. 
A) Producers might offer product guarantees and warranties. 
B) Producers might be required to meet certain legal standards to obtain licenses granting the right to sell their products. 
C) Government agencies might be charged with directly overseeing production and distribution of certain products. 
D) Liability laws might be established to ensure that firms selling certain products must face penalties in the event the products function poorly. A

Question 3

According to the text, critics point out that the costs incurred by firms due to regulations

Accepted Answer

A) increase production costs. 
B) lower production costs to the shutdown point. 
C) reduce taxes too far. 
D) none of the above. 
A) increase production costs. 
B) lower production costs to the shutdown point. 
C) reduce taxes too far. 
D) none of the above. A

Question 4

-Use the above figure. If a commission regulates the above monopoly using fair-return (average cost pricing), then the industry's output will be ________ and the product's price will be ________.

Accepted Answer

A)    ;   
B)    ;   
C)    ;   
D)    ;   
A)    ;   
B)    ;   
C)    ;   
D)    ;

Question 5

Another name for the "Chain Store Act" is

Accepted Answer

A) the Sherman Antitrust Act of 1890. 
B) the Clayton Act of 1914. 
C) the Federal Trade Commission Act of 1914. 
D) the Robinson-Patman Act of 1936. 
A) the Sherman Antitrust Act of 1890. 
B) the Clayton Act of 1914. 
C) the Federal Trade Commission Act of 1914. 
D) the Robinson-Patman Act of 1936.

Question 6

The Sudsy Soda Company will not sell its soft drinks to a restaurant unless that business also buys paper cups from Sudsy. This requirement is an example of

Accepted Answer

A) product versioning. 
B) tie-in sales. 
C) price differentiation. 
D) complementary pricing. 
A) product versioning. 
B) tie-in sales. 
C) price differentiation. 
D) complementary pricing.

Question 7

The first major law created to control the growth of monopoly power was the

Accepted Answer

A) Sherman Act. 
B) Clayton Act. 
C) FTC Act. 
D) Robinson-Patman Act. 
A) Sherman Act. 
B) Clayton Act. 
C) FTC Act. 
D) Robinson-Patman Act.

Question 8

What is the difference between holding a monopoly and monopolization? Which is illegal? Explain.

Accepted Answer

Monopolization involves having a monopol

Question 9

Explain the share-the-gains, share-the-pains theory. How does it differ from the capture hypothesis?

Accepted Answer

The share-the-gains, share-the-pains the

Question 10

What is the relationship between the Sherman Antitrust Act and the Clayton Act?

Accepted Answer

A) The Clayton Act was the first act passed and the Sherman Antitrust Act was the second. 
B) The Sherman Antitrust Act encouraged competition among firms in the U.S. while the Clayton Act encouraged competition among foreign firms. 
C) The Clayton Act strengthened the Sherman Antitrust Act by limiting some very specific business practices. 
D) Both Acts deal with issues of setting price and quantity for regulated industries. 
A) The Clayton Act was the first act passed and the Sherman Antitrust Act was the second. 
B) The Sherman Antitrust Act encouraged competition among firms in the U.S. while the Clayton Act encouraged competition among foreign firms. 
C) The Clayton Act strengthened the Sherman Antitrust Act by limiting some very specific business practices. 
D) Both Acts deal with issues of setting price and quantity for regulated industries.

Question 11

Suppose OSHA requires a factory to install specific safety equipment to reduce the number of injuries in the factory. Would the number of accidents necessarily decline? Why or why not?

Accepted Answer

No. If the feedback effect is

Question 12

Distinguish between cost-of-service regulation and rate-of return regulation. What problem is inherent in both types of regulation?

Accepted Answer

Cost-of-service regulation allows the re

Question 13

Defining the "relevant market" involves looking at two components. They are

Accepted Answer

A) the competitive market and the dominant market. 
B) the local market and the national market. 
C) the geographic market and the product market. 
D) the goods market and the services market. 
A) the competitive market and the dominant market. 
B) the local market and the national market. 
C) the geographic market and the product market. 
D) the goods market and the services market.

Question 14

One of the elements of monopolization is

Accepted Answer

A) having a superior product or having a superior business acumen.. 
B) the possession of monopoly power in the relevant market. 
C) when only one firm exists in an industry. 
D) having a significant pricing power due to an accident in the relevant market. 
A) having a superior product or having a superior business acumen.. 
B) the possession of monopoly power in the relevant market. 
C) when only one firm exists in an industry. 
D) having a significant pricing power due to an accident in the relevant market.

Question 15

Which of the following best describes the difference between cost-of-service regulation and rate-of-return regulation?

Accepted Answer

A) Costs determine prices in cost-of-service regulation and prices determine costs in rate-of-return regulation. 
B) Costs determine prices in cost-of-service regulation and prices are set in rate-of-return regulation so the firm can make a normal rate of return. 
C) Variable costs determine prices in cost-of-service regulation and prices are set in rate-of-return regulation so the firm can make an economic profit. 
D) Regulators determine prices in cost-of-service regulation and market forces determine prices in rate-of-return regulation. 
A) Costs determine prices in cost-of-service regulation and prices determine costs in rate-of-return regulation. 
B) Costs determine prices in cost-of-service regulation and prices are set in rate-of-return regulation so the firm can make a normal rate of return. 
C) Variable costs determine prices in cost-of-service regulation and prices are set in rate-of-return regulation so the firm can make an economic profit. 
D) Regulators determine prices in cost-of-service regulation and market forces determine prices in rate-of-return regulation.

Question 16

Which of the following acts outlawed selling products at "unreasonably low prices" with the intent of reducing competition?

Accepted Answer

A) Sherman Act 
B) FTC Act 
C) Robinson-Patman Act 
D) Wheeler-Lea Act 
A) Sherman Act 
B) FTC Act 
C) Robinson-Patman Act 
D) Wheeler-Lea Act

Question 17

The problem of asymmetric information that brings about a general decline in product quality in an industry is

Accepted Answer

A) a market failure. 
B) the result of government regulation. 
C) creative response. 
D) the lemons problem. 
A) a market failure. 
B) the result of government regulation. 
C) creative response. 
D) the lemons problem.

Question 18

A retail store cuts the prices of the products it sells to force its competitor to leave the market. This is prohibited by the

Accepted Answer

A) Sherman Act 
B) Robinson-Patman Act 
C) Aldrich Act. 
D) FTC Act 
A) Sherman Act 
B) Robinson-Patman Act 
C) Aldrich Act. 
D) FTC Act

Question 19

If a natural monopolist is unregulated, then

Accepted Answer

A) the monopoly will produce efficiently from society's point of view. 
B) the monopoly will produce inefficiently from society's point of view. 
C) the monopolist will be earning just a normal rate of return on investment. 
D) the monopolist will determine the profit maximizing quantity by equating marginal cost to the demand curve. 
A) the monopoly will produce efficiently from society's point of view. 
B) the monopoly will produce inefficiently from society's point of view. 
C) the monopolist will be earning just a normal rate of return on investment. 
D) the monopolist will determine the profit maximizing quantity by equating marginal cost to the demand curve.

Question 20

Which of the following is illegal according to the antitrust laws?

Accepted Answer

A) the use of coupons 
B) price discrimination based on cost differences 
C) vertical mergers 
D) price fixing 
A) the use of coupons 
B) price discrimination based on cost differences 
C) vertical mergers 
D) price fixing

Exam 27: Regulation and Antitrust Policy in a Globalized Economy

When regulators identify with the special interests of the industry they regulate, this behavior conforms with the

Which of the following is a possible market solution to the lemons problem?

According to the text, critics point out that the costs incurred by firms due to regulations

-Use the above figure. If a commission regulates the above monopoly using fair-return (average cost pricing), then the industry's output will be ________ and the product's price will be ________.

Another name for the "Chain Store Act" is

The Sudsy Soda Company will not sell its soft drinks to a restaurant unless that business also buys paper cups from Sudsy. This requirement is an example of

The first major law created to control the growth of monopoly power was the

What is the difference between holding a monopoly and monopolization? Which is illegal? Explain.

Explain the share-the-gains, share-the-pains theory. How does it differ from the capture hypothesis?

What is the relationship between the Sherman Antitrust Act and the Clayton Act?

Suppose OSHA requires a factory to install specific safety equipment to reduce the number of injuries in the factory. Would the number of accidents necessarily decline? Why or why not?

Distinguish between cost-of-service regulation and rate-of return regulation. What problem is inherent in both types of regulation?

Defining the "relevant market" involves looking at two components. They are

One of the elements of monopolization is

Which of the following best describes the difference between cost-of-service regulation and rate-of-return regulation?

Which of the following acts outlawed selling products at "unreasonably low prices" with the intent of reducing competition?

The problem of asymmetric information that brings about a general decline in product quality in an industry is

A retail store cuts the prices of the products it sells to force its competitor to leave the market. This is prohibited by the

If a natural monopolist is unregulated, then

Which of the following is illegal according to the antitrust laws?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

-Use the above figure. If a commission regulates the above monopoly using fair-return (average cost pricing), then the industry's output will be and the product's price will be .