Question 1

While economic regulation applies to ________ industries, social regulation applies to ________ firms.

Accepted Answer

A) particular; individual 
B) particular; all 
C) all; individual 
D) utility; healthcare 
A) particular; individual 
B) particular; all 
C) all; individual 
D) utility; healthcare

Question 2

If regulators disallow price increases requested by a natural monopoly that is currently earning an economic loss, quality of service will

Accepted Answer

A) increase rapidly. 
B) likely fall. 
C) remain unchanged. 
D) none of the above. 
A) increase rapidly. 
B) likely fall. 
C) remain unchanged. 
D) none of the above.

Question 3

The federal regulatory agency whose mission is to regulate workplace health and safety is the

Accepted Answer

A) AFL-CIO. 
B) FTC. 
C) OSHA. 
D) SEC. 
A) AFL-CIO. 
B) FTC. 
C) OSHA. 
D) SEC.

Question 4

Which of the following is an example of an agency concerned with social regulation?

Accepted Answer

A) Federal Communications Commission 
B) Securities and Exchange Commission 
C) Consumer Product Safety Commission 
D) Federal Energy Regulatory Commission 
A) Federal Communications Commission 
B) Securities and Exchange Commission 
C) Consumer Product Safety Commission 
D) Federal Energy Regulatory Commission

Question 5

The lemons problem occurs mainly because of

Accepted Answer

A) asymmetric information. 
B) a market failure. 
C) negative externality. 
D) a monopoly. 
A) asymmetric information. 
B) a market failure. 
C) negative externality. 
D) a monopoly.

Question 6

Which of the following federal agencies is NOT engaged in economic regulation?

Accepted Answer

A) The Federal Reserve 
B) Federal Aviation Administration 
C) Food and Drug Administration 
D) Federal Deposit Insurance Corporation 
A) The Federal Reserve 
B) Federal Aviation Administration 
C) Food and Drug Administration 
D) Federal Deposit Insurance Corporation

Question 7

Since 1970, federal expenditures by regulatory agencies have

Accepted Answer

A) remained constant. 
B) decreased slightly. 
C) increased dramatically. 
D) increased slightly. 
A) remained constant. 
B) decreased slightly. 
C) increased dramatically. 
D) increased slightly.

Question 8

One key purpose of economic regulation is

Accepted Answer

A) to force a firm to produce at the point at which 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 at which 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 9

-Refer to the above figure. From the standpoint of society, the optimal output is

Accepted Answer

A) Q1 
B) Q2 
C) Q3 
D) Q4 
A) Q1 
B) Q2 
C) Q3 
D) Q4

Question 10

Under rate-of-return regulation, the price is set so that

Accepted Answer

A) price equals the marginal cost of production. 
B) the firm earns a positive economic profit. 
C) the firm earns a monopoly profit. 
D) the firm earns a normal rate of return on investment. 
A) price equals the marginal cost of production. 
B) the firm earns a positive economic profit. 
C) the firm earns a monopoly profit. 
D) the firm earns a normal rate of return on investment.

Question 11

The costs of regulation

Accepted Answer

A) include increased taxes and increased prices of the products being regulated. 
B) are paid entirely by the regulated industries. 
C) are more than covered by the benefits gained from the regulation. 
D) are relatively small. 
A) include increased taxes and increased prices of the products being regulated. 
B) are paid entirely by the regulated industries. 
C) are more than covered by the benefits gained from the regulation. 
D) are relatively small.

Question 12

-Use the above figure. If this monopolist was not regulated, the profit-maximizing quantity and price would be

Accepted Answer

A) Q2 and P1. 
B) Q2 and P3. 
C) Q3 and P2. 
D) Q4 and P1. 
A) Q2 and P1. 
B) Q2 and P3. 
C) Q3 and P2. 
D) Q4 and P1.

Question 13

"As compared to the benefits of economic and social regulation, the costs are minimal." Do you agree or disagree? Why?

Accepted Answer

Disagree. The total costs of regulation

Question 14

In the above figure, if this natural monopolist were forced to use marginal cost pricing, it 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 15

If government regulators make the natural monopolist set price equal to marginal cost

Accepted Answer

A) the natural monopolist will make zero economic profits. 
B) the natural monopolist will make normal profits. 
C) the natural monopolist will make losses and go out of business. 
D) the natural monopolist will make positive economic profits larger than if it wasn't regulated at all. 
A) the natural monopolist will make zero economic profits. 
B) the natural monopolist will make normal profits. 
C) the natural monopolist will make losses and go out of business. 
D) the natural monopolist will make positive economic profits larger than if it wasn't regulated at all.

Question 16

The total costs of federal regulation

Accepted Answer

A) encompasses only explicit costs of satisfying regulatory demands. 
B) also includes the explicit costs associated with regulations issued by 50 different state governments. 
C) encompasses only opportunity costs of satisfying regulatory demands. 
D) encompasses both explicit and opportunity costs of satisfying regulatory demands.. 
A) encompasses only explicit costs of satisfying regulatory demands. 
B) also includes the explicit costs associated with regulations issued by 50 different state governments. 
C) encompasses only opportunity costs of satisfying regulatory demands. 
D) encompasses both explicit and opportunity costs of satisfying regulatory demands..

Question 17

According to the ________ theory of regulation, regulators must take into account the preferences of legislators, consumers, and producers.

Accepted Answer

A) capture 
B) general interest 
C) public interest 
D) share-the-gains, share-the-pains 
A) capture 
B) general interest 
C) public interest 
D) share-the-gains, share-the-pains

Question 18

The total cost of federal regulation includes

Accepted Answer

A) the funding of government agencies overseeing compliance, the compliance cost for the regulated firms, and the opportunity cost of regulation for the firms. 
B) the funding of government agencies overseeing compliance less the compliance cost for the regulated firms and the opportunity cost of regulation for the firms. 
C) only the cost of compliance by the regulated firms. 
D) only the funding of the regulatory agencies. 
A) the funding of government agencies overseeing compliance, the compliance cost for the regulated firms, and the opportunity cost of regulation for the firms. 
B) the funding of government agencies overseeing compliance less the compliance cost for the regulated firms and the opportunity cost of regulation for the firms. 
C) only the cost of compliance by the regulated firms. 
D) only the funding of the regulatory agencies.

Question 19

According to the capture hypothesis of regulation,

Accepted Answer

A) regulation favors producers over consumers because the producers were able to pay off the regulators. 
B) regulation eventually favors producers over consumers because the producers have more at stake than individual consumers. 
C) regulation benefits the regulators and the legislators who support the regulation by enabling them to obtain favors from both producers and consumers. 
D) regulation benefits the consumers over producers because the number of consumers is greater than the number of producers, giving the consumers more political clout. 
A) regulation favors producers over consumers because the producers were able to pay off the regulators. 
B) regulation eventually favors producers over consumers because the producers have more at stake than individual consumers. 
C) regulation benefits the regulators and the legislators who support the regulation by enabling them to obtain favors from both producers and consumers. 
D) regulation benefits the consumers over producers because the number of consumers is greater than the number of producers, giving the consumers more political clout.

Question 20

In average cost pricing, the natural monopoly would have to set price equal to

Accepted Answer

A) AFC. 
B) AVC. 
C) ATC. 
D) MC. 
A) AFC. 
B) AVC. 
C) ATC. 
D) MC.

Exam 27: Regulation and Antitrust Policy in a Globalized Economy

While economic regulation applies to ________ industries, social regulation applies to ________ firms.

If regulators disallow price increases requested by a natural monopoly that is currently earning an economic loss, quality of service will

The federal regulatory agency whose mission is to regulate workplace health and safety is the

Which of the following is an example of an agency concerned with social regulation?

The lemons problem occurs mainly because of

Which of the following federal agencies is NOT engaged in economic regulation?

Since 1970, federal expenditures by regulatory agencies have

One key purpose of economic regulation is

-Refer to the above figure. From the standpoint of society, the optimal output is

Under rate-of-return regulation, the price is set so that

The costs of regulation

-Use the above figure. If this monopolist was not regulated, the profit-maximizing quantity and price would be

"As compared to the benefits of economic and social regulation, the costs are minimal." Do you agree or disagree? Why?

In the above figure, if this natural monopolist were forced to use marginal cost pricing, it would produce

If government regulators make the natural monopolist set price equal to marginal cost

The total costs of federal regulation

According to the ________ theory of regulation, regulators must take into account the preferences of legislators, consumers, and producers.

The total cost of federal regulation includes

According to the capture hypothesis of regulation,

In average cost pricing, the natural monopoly would have to set price equal to

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

While economic regulation applies to industries, social regulation applies to firms.