Question 1

The lemons problem is a situation of

Accepted Answer

A) perfect competition. 
B) asymmetric information. 
C) creative response. 
D) a natural monopoly. 
A) perfect competition. 
B) asymmetric information. 
C) creative response. 
D) a natural monopoly.

Question 2

Which of the following organizations is exempt from prosecution under the Sherman Antitrust Act (1890)?

Accepted Answer

A) retailers 
B) book publishers 
C) labor unions 
D) television stations 
A) retailers 
B) book publishers 
C) labor unions 
D) television stations

Question 3

The Sherman Antitrust Act was enforced in 1906 by a ruling of the Supreme Court regarding the monopolization of the oil industry by

Accepted Answer

A) Getty Oil of Oklahoma. 
B) Texaco Oil of Texas. 
C) Gulf Oil of Pennsylvania. 
D) Standard Oil of New Jersey. 
A) Getty Oil of Oklahoma. 
B) Texaco Oil of Texas. 
C) Gulf Oil of Pennsylvania. 
D) Standard Oil of New Jersey.

Question 4

Which of the following is FALSE with respect to regulation?

Accepted Answer

A) Regulated firms commonly try to avoid the effects of regulation whenever they can. 
B) Firms engage in creative responses which conform to the letter of the law but undermine its spirit. 
C) Regulation has resulted in state laws that have made creative response illegal in many states. 
D) Recent regulations have generated feedback effects that undermined the key aim of the rules. 
A) Regulated firms commonly try to avoid the effects of regulation whenever they can. 
B) Firms engage in creative responses which conform to the letter of the law but undermine its spirit. 
C) Regulation has resulted in state laws that have made creative response illegal in many states. 
D) Recent regulations have generated feedback effects that undermined the key aim of the rules.

Question 5

The reason an unregulated natural monopolist will produce at an economically inefficient quantity is

Accepted Answer

A) due to the fact that the monopolist will equate marginal cost with price to determine the output level. 
B) due to the fact that the monopolist will equate average total cost with price to determine the output level. 
C) that the price does not equal the true marginal cost of producing the good. 
D) that the monopolist will produce a quantity greater than the minimum of the average total cost curve. 
A) due to the fact that the monopolist will equate marginal cost with price to determine the output level. 
B) due to the fact that the monopolist will equate average total cost with price to determine the output level. 
C) that the price does not equal the true marginal cost of producing the good. 
D) that the monopolist will produce a quantity greater than the minimum of the average total cost curve.

Question 6

A natural monopoly that is not regulated will choose to produce at the

Accepted Answer

A) minimum point of the long-run average cost curve. 
B) point at which marginal cost is above average total cost. 
C) point at which the demand curve intersects the long-run average cost curve. 
D) point at which marginal revenue equals marginal cost. 
A) minimum point of the long-run average cost curve. 
B) point at which marginal cost is above average total cost. 
C) point at which the demand curve intersects the long-run average cost curve. 
D) point at which marginal revenue equals marginal cost.

Question 7

What is the main difference between economic regulation and social regulation?

Accepted Answer

Economic regulation involves only partic

Question 8

The problem of excess pollution mainly occurs because of

Accepted Answer

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

Question 9

The key issue in determining the relevant product market is

Accepted Answer

A) the degree of interchangeability between products. 
B) the specific geographic area in which competing products overlap. 
C) the production processes used to produce the goods. 
D) the market share test. 
A) the degree of interchangeability between products. 
B) the specific geographic area in which competing products overlap. 
C) the production processes used to produce the goods. 
D) the market share test.

Question 10

Which of the following statements can correctly be made about social regulation? I. Extensive social regulation may have an anticompetitive effect.
II. The benefits of social regulation are easier to measure than are the costs of social regulation.

Accepted Answer

A) I only 
B) II only 
C) Both I and II 
D) Neither I nor II 
A) I only 
B) II only 
C) Both I and II 
D) Neither I nor II

Question 11

An unregulated natural monopolist would produce to the point at which

Accepted Answer

A) P = AC. 
B) MR = AC. 
C) MR = MC. 
D) P = MR. 
A) P = AC. 
B) MR = AC. 
C) MR = MC. 
D) P = MR.

Question 12

Suppose technical change permits cable television companies to provide their services at lower rates. The share-the-gains, share-the-pains theory would predict that the regulators would

Accepted Answer

A) permit the firms to keep the savings and would lower prices only if the firms were pressured to do so. 
B) force the firms to pass all the savings on to consumers in the form of lower prices. 
C) force the firms to pass the savings on to consumers in the form of better service. 
D) force the firms to pass some of the savings on to consumers and to permit the firms to keep some of the savings themselves. 
A) permit the firms to keep the savings and would lower prices only if the firms were pressured to do so. 
B) force the firms to pass all the savings on to consumers in the form of lower prices. 
C) force the firms to pass the savings on to consumers in the form of better service. 
D) force the firms to pass some of the savings on to consumers and to permit the firms to keep some of the savings themselves.

Question 13

When Microsoft put together a set of products with the Windows operating system, it was practicing

Accepted Answer

A) bundling. 
B) tie-in sales. 
C) versioning. 
D) compacting. 
A) bundling. 
B) tie-in sales. 
C) versioning. 
D) compacting.

Question 14

One undesirable effect of social regulation is that it

Accepted Answer

A) affects smaller firms disproportionately, creating anticompetitive effects. 
B) destroys incentives for firms to engage in marginal cost pricing. 
C) raises prices of goods to consumers, while lowering prices to business and special interest groups. 
D) reduces the effectiveness of economic regulation. 
A) affects smaller firms disproportionately, creating anticompetitive effects. 
B) destroys incentives for firms to engage in marginal cost pricing. 
C) raises prices of goods to consumers, while lowering prices to business and special interest groups. 
D) reduces the effectiveness of economic regulation.

Question 15

In marginal 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.

Question 16

The Supreme Court's decision in the Standard Oil of New Jersey case was

Accepted Answer

A) to force the company to send refund checks to customers. 
B) to force the company to pay $10 billion in fines. 
C) to increase the fine imposed by a lower court. 
D) to break up the company. 
A) to force the company to send refund checks to customers. 
B) to force the company to pay $10 billion in fines. 
C) to increase the fine imposed by a lower court. 
D) to break up the company.

Question 17

The Food and Drug Administration (FDA)is an agency that would enforce

Accepted Answer

A) social regulation. 
B) economic regulation. 
C) antitrust laws. 
D) price discrimination. 
A) social regulation. 
B) economic regulation. 
C) antitrust laws. 
D) price discrimination.

Question 18

A possible market solution that a reputable firm can engage in when faced with the lemons problem is

Accepted Answer

A) to offer a warranty. 
B) to engage in externalities. 
C) to create asymmetric information. 
D) to use average cost pricing. 
A) to offer a warranty. 
B) to engage in externalities. 
C) to create asymmetric information. 
D) to use average cost pricing.

Question 19

In the United States, antitrust enforcement focuses on

Accepted Answer

A) the profitability of the leading firms in an industry. 
B) the degree of market concentration within a market. 
C) the average level of prices charged by firms. 
D) the price-cost margin of an industry. 
A) the profitability of the leading firms in an industry. 
B) the degree of market concentration within a market. 
C) the average level of prices charged by firms. 
D) the price-cost margin of an industry.

Question 20

Which of the following is NOT an objective of economic regulation?

Accepted Answer

A) to regulate the prices enterprises are allowed to charge 
B) to fix prices so that they are never allowed to rise 
C) to keep rates of return in an industry at a competitive level 
D) to prevent monopoly profits 
A) to regulate the prices enterprises are allowed to charge 
B) to fix prices so that they are never allowed to rise 
C) to keep rates of return in an industry at a competitive level 
D) to prevent monopoly profits

Exam 27: Regulation and Antitrust Policy in a Globalized Economy

The lemons problem is a situation of

Which of the following organizations is exempt from prosecution under the Sherman Antitrust Act (1890)?

The Sherman Antitrust Act was enforced in 1906 by a ruling of the Supreme Court regarding the monopolization of the oil industry by

Which of the following is FALSE with respect to regulation?

The reason an unregulated natural monopolist will produce at an economically inefficient quantity is

A natural monopoly that is not regulated will choose to produce at the

What is the main difference between economic regulation and social regulation?

The problem of excess pollution mainly occurs because of

The key issue in determining the relevant product market is

Which of the following statements can correctly be made about social regulation? I. Extensive social regulation may have an anticompetitive effect. II. The benefits of social regulation are easier to measure than are the costs of social regulation.

An unregulated natural monopolist would produce to the point at which

Suppose technical change permits cable television companies to provide their services at lower rates. The share-the-gains, share-the-pains theory would predict that the regulators would

When Microsoft put together a set of products with the Windows operating system, it was practicing

One undesirable effect of social regulation is that it

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

The Supreme Court's decision in the Standard Oil of New Jersey case was

The Food and Drug Administration (FDA)is an agency that would enforce

A possible market solution that a reputable firm can engage in when faced with the lemons problem is

In the United States, antitrust enforcement focuses on

Which of the following is NOT an objective of economic regulation?

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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