Question 1

Which type of regulation applies to all firms in the economy, as opposed to only covering specific industries?

Accepted Answer

A) Economic regulation 
B) Social regulation 
C) Rate regulation 
D) Statutory regulation 
A) Economic regulation 
B) Social regulation 
C) Rate regulation 
D) Statutory regulation

Question 2

The purpose of social regulation is

Accepted Answer

A) to force a firm to produce at the point where marginal cost equals marginal revenue. 
B) to control the quality of service provided by a monopolist. 
C) to control the price that regulated enterprises are allowed to charge. 
D) to focus on the impact of production on the environment and society, the working conditions under which goods and services are produced, and sometimes the physical attributes of goods. 
A) to force a firm to produce at the point where marginal cost equals marginal revenue. 
B) to control the quality of service provided by a monopolist. 
C) to control the price that regulated enterprises are allowed to charge. 
D) to focus on the impact of production on the environment and society, the working conditions under which goods and services are produced, and sometimes the physical attributes of goods.

Question 3

Which of the following is most subject to the lemons problem?

Accepted Answer

A) credence goods 
B) homogeneous goods 
C) search goods 
D) inferior goods 
A) credence goods 
B) homogeneous goods 
C) search goods 
D) inferior goods

Question 4

Clarke's gas station in Podunk only sells gasoline if customers also purchase oil.

Accepted Answer

A) This is called a tie-in sale and is in violation of antitrust laws. 
B) This is not in violation of antitrust laws, as cars need both oil and gas. 
C) This is not in violation of antitrust laws, as consumers get the oil below market prices. 
D) This is in violation of the Robinson-Patman Act. 
A) This is called a tie-in sale and is in violation of antitrust laws. 
B) This is not in violation of antitrust laws, as cars need both oil and gas. 
C) This is not in violation of antitrust laws, as consumers get the oil below market prices. 
D) This is in violation of the Robinson-Patman Act.

Question 5

Social regulation is focused on all of the following EXCEPT

Accepted Answer

A) the impact of production on the environment and society. 
B) better working conditions, and safer and better products. 
C) a better quality of life through a less polluted environment. 
D) ensuring costs are minimized and benefits are maximized. 
A) the impact of production on the environment and society. 
B) better working conditions, and safer and better products. 
C) a better quality of life through a less polluted environment. 
D) ensuring costs are minimized and benefits are maximized.

Question 6

According to the text, the federal government spends the most taxpayer-provided funds regulating which area of the economy?

Accepted Answer

A) The environment 
B) Finance and banking 
C) Consumer safety and health 
D) Transportation 
A) The environment 
B) Finance and banking 
C) Consumer safety and health 
D) Transportation

Question 7

In the above figure, if this natural monopolist were unregulated, the profit maximizing firm would produce

Accepted Answer

A) at Q1 output rate. 
B) at Q2 output rate. 
C) at Q3 output rate. 
D) past the Q3 output rate. 
A) at Q1 output rate. 
B) at Q2 output rate. 
C) at Q3 output rate. 
D) past the Q3 output rate.

Question 8

The benefits of social regulation usually are

Accepted Answer

A) small. 
B) obvious to people while the costs are hidden. 
C) less than the costs of social regulation, reducing overall welfare. 
D) difficult to measure. 
A) small. 
B) obvious to people while the costs are hidden. 
C) less than the costs of social regulation, reducing overall welfare. 
D) difficult to measure.

Question 9

-Use the above figure. A regulatory commission sets the maximum price this monopolist can charge at P1. If this monopolist were to produce, it

Accepted Answer

A) would produce   output and generate losses. 
B) would produce   output and generate profits. 
C) would produce   output and generate losses. 
D) would produce   output and generate profits. 
A) would produce   output and generate losses. 
B) would produce   output and generate profits. 
C) would produce   output and generate losses. 
D) would produce   output and generate profits.

Question 10

-In the above figure, if the monopolist engages in marginal cost pricing, what are its output and price?

Accepted Answer

A) 1,200, $3 
B) 900, $7 
C) 700, $7 
D) 700, $10 
A) 1,200, $3 
B) 900, $7 
C) 700, $7 
D) 700, $10

Question 11

In a natural monopoly situation,

Accepted Answer

A) there are large economies of scale relative to demand. 
B) the firm has an upward sloping average cost curve. 
C) producers try to differentiate their product with advertising. 
D) there is no need for government regulation. 
A) there are large economies of scale relative to demand. 
B) the firm has an upward sloping average cost curve. 
C) producers try to differentiate their product with advertising. 
D) there is no need for government regulation.

Question 12

The United States as a whole would be inappropriate as the relevant geographic market when an antitrust case involved

Accepted Answer

A) ABC and NBC. 
B) two auto producers. 
C) two steel producers. 
D) two concrete producers. 
A) ABC and NBC. 
B) two auto producers. 
C) two steel producers. 
D) two concrete producers.

Question 13

-In the above figure, what would be the profit or loss at the profit-maximizing output for this natural monopolist?

Accepted Answer

A) -$300 
B) $2,700 
C) $2,100 
D) -$1,200 
A) -$300 
B) $2,700 
C) $2,100 
D) -$1,200

Question 14

The Sherman Act

Accepted Answer

A) prohibited banks from crossing states lines. 
B) prohibited railroads from transporting explosives. 
C) provided for the regulation of natural monopolies. 
D) declared that monopolization and restraint of trade were illegal. 
A) prohibited banks from crossing states lines. 
B) prohibited railroads from transporting explosives. 
C) provided for the regulation of natural monopolies. 
D) declared that monopolization and restraint of trade were illegal.

Question 15

This agency is responsible for regulating the quality and safety of foods, health and medical products, pharmaceuticals, cosmetics, and animal feed.

Accepted Answer

A) Environmental Protection Agency 
B) Food and Drug Administration 
C) Equal Employment Opportunity Commission 
D) Federal Trade Commission 
A) Environmental Protection Agency 
B) Food and Drug Administration 
C) Equal Employment Opportunity Commission 
D) Federal Trade Commission

Question 16

Regulation focused on the impact of production on the environment and society, the working conditions under which production occurs, or the physical attributes of goods, is known as

Accepted Answer

A) cost-of-service regulation. 
B) rate-of-return regulation. 
C) social regulation. 
D) monopoly regulation. 
A) cost-of-service regulation. 
B) rate-of-return regulation. 
C) social regulation. 
D) monopoly regulation.

Question 17

The Federal Trade Commission was established in 1914 to

Accepted Answer

A) regulate trade of public goods. 
B) promote competition in interstate commerce. 
C) investigate unfair competitive practices. 
D) prevent non-price competition. 
A) regulate trade of public goods. 
B) promote competition in interstate commerce. 
C) investigate unfair competitive practices. 
D) prevent non-price competition.

Question 18

The Federal Trade Commission Act, as amended, prohibits

Accepted Answer

A) horizontal mergers. 
B) price-fixing agreements. 
C) unfair competitive practices and deceptive acts. 
D) price discrimination. 
A) horizontal mergers. 
B) price-fixing agreements. 
C) unfair competitive practices and deceptive acts. 
D) price discrimination.

Question 19

The "capture" in the capture hypothesis occurs because

Accepted Answer

A) regulators try to promote everyone's best interest. 
B) society doesn't care for regulatory agencies. 
C) regulators always know what is in society's best interest. 
D) regulators usually have been or will be associated with the industries they regulate. 
A) regulators try to promote everyone's best interest. 
B) society doesn't care for regulatory agencies. 
C) regulators always know what is in society's best interest. 
D) regulators usually have been or will be associated with the industries they regulate.

Question 20

-The difference between cost-of-service regulation and rate-of-return regulation is that

Accepted Answer

A) the former sets prices based on actual costs, and the latter focuses on setting prices such that the firm earns a normal rate of return. 
B) the latter sets prices first, and then the firm must keep costs in line if it wants to earn a profit, and the former sets price high enough to cover costs. 
C) the former uses marginal cost pricing and the latter uses average cost pricing. 
D) the former uses average cost pricing and the latter uses marginal cost pricing. 
A) the former sets prices based on actual costs, and the latter focuses on setting prices such that the firm earns a normal rate of return. 
B) the latter sets prices first, and then the firm must keep costs in line if it wants to earn a profit, and the former sets price high enough to cover costs. 
C) the former uses marginal cost pricing and the latter uses average cost pricing. 
D) the former uses average cost pricing and the latter uses marginal cost pricing.

Exam 27: Regulation and Antitrust Policy in a Globalized Economy

Which type of regulation applies to all firms in the economy, as opposed to only covering specific industries?

The purpose of social regulation is

Which of the following is most subject to the lemons problem?

Clarke's gas station in Podunk only sells gasoline if customers also purchase oil.

Social regulation is focused on all of the following EXCEPT

According to the text, the federal government spends the most taxpayer-provided funds regulating which area of the economy?

In the above figure, if this natural monopolist were unregulated, the profit maximizing firm would produce

The benefits of social regulation usually are

-Use the above figure. A regulatory commission sets the maximum price this monopolist can charge at P1. If this monopolist were to produce, it

-In the above figure, if the monopolist engages in marginal cost pricing, what are its output and price?

In a natural monopoly situation,

The United States as a whole would be inappropriate as the relevant geographic market when an antitrust case involved

-In the above figure, what would be the profit or loss at the profit-maximizing output for this natural monopolist?

The Sherman Act

This agency is responsible for regulating the quality and safety of foods, health and medical products, pharmaceuticals, cosmetics, and animal feed.

Regulation focused on the impact of production on the environment and society, the working conditions under which production occurs, or the physical attributes of goods, is known as

The Federal Trade Commission was established in 1914 to

The Federal Trade Commission Act, as amended, prohibits

The "capture" in the capture hypothesis occurs because

-The difference between cost-of-service regulation and rate-of-return regulation is that

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

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