Question 1

When consumers in a market become fully informed of negative information about the product, we can expect the

Accepted Answer

A)  price of the product to decrease. 
B)  price of the product to increase. 
C)  price of the product to remain constant but the equilibrium quantity to decrease. 
D)  equilibrium quantity of the product to increase. 
A)  price of the product to decrease. 
B)  price of the product to increase. 
C)  price of the product to remain constant but the equilibrium quantity to decrease. 
D)  equilibrium quantity of the product to increase. A

Question 2

The task of economic regulation is to:

Accepted Answer

A)  protect monopoly profits. 
B)  approximate the results of the competitive market. 
C)  replace competition with government ownership. 
D)  increase competition within the market. 
A)  protect monopoly profits. 
B)  approximate the results of the competitive market. 
C)  replace competition with government ownership. 
D)  increase competition within the market. B

Question 3

Deregulation, especially for the transportation and telecommunication industries, was the trend in the United States during the:

Accepted Answer

A)  1930s and it means increasing or phasing in government restrictions on economic activity. 
B)  1950s and it means elimination or phasing out of government restrictions on economic activity. 
C)  1970s and it means increasing or phasing in government restrictions on economic activity. 
D)  1980s and it means elimination or phasing out of government restrictions on economic activity. 
A)  1930s and it means increasing or phasing in government restrictions on economic activity. 
B)  1950s and it means elimination or phasing out of government restrictions on economic activity. 
C)  1970s and it means increasing or phasing in government restrictions on economic activity. 
D)  1980s and it means elimination or phasing out of government restrictions on economic activity. D

Question 4

A merger between two firms with unrelated products is a

Accepted Answer

A)  vertical merger. 
B)  conglomerate merger. 
C)  horizontal merger. 
D)  monopoly merger. 
A)  vertical merger. 
B)  conglomerate merger. 
C)  horizontal merger. 
D)  monopoly merger.

Question 5

Under a rule of reason approach, which of the following would be legal in the United States?

Accepted Answer

A)  The merger of Paco's Taqueria and Maria's Mexican Bistro, independent restaurants in the unconcentrated sit-down restaurant market. 
B)  Price fixing between IBM and Compaq. 
C)  Ford and General Motors electing the same person to their boards of directors. 
D)  Kellogg's and General Mills collude to drive Quaker Oats out of the business. 
A)  The merger of Paco's Taqueria and Maria's Mexican Bistro, independent restaurants in the unconcentrated sit-down restaurant market. 
B)  Price fixing between IBM and Compaq. 
C)  Ford and General Motors electing the same person to their boards of directors. 
D)  Kellogg's and General Mills collude to drive Quaker Oats out of the business.

Question 6

In the 1945 Alcoa antitrust case, the Court found Alcoa:

Accepted Answer

A)  not guilty of violating the Sherman Antitrust Act because it was a good monopoly. 
B)  did not have a good reason for having a large market share, so found it guilty. 
C)  guilty because its firm size was a per se violation of antitrust laws. 
D)  not guilty because it did not engage in any illegal or unfair acts. 
A)  not guilty of violating the Sherman Antitrust Act because it was a good monopoly. 
B)  did not have a good reason for having a large market share, so found it guilty. 
C)  guilty because its firm size was a per se violation of antitrust laws. 
D)  not guilty because it did not engage in any illegal or unfair acts.

Question 7

In which of the following cases was the firm a natural monopoly at the beginning of the case but no longer a natural monopoly when the case resolved?

Accepted Answer

A)  IBM case 
B)  Alcoa case 
C)  Standard Oil case 
D)  AT&T case 
A)  IBM case 
B)  Alcoa case 
C)  Standard Oil case 
D)  AT&T case

Question 8

A market failure that causes overconsumption of a product because the sellers know something negative about a product that the buyers do not know is called

Accepted Answer

A)  imperfect information. 
B)  collusion. 
C)  regulatory capture. 
D)  deadweight loss. 
A)  imperfect information. 
B)  collusion. 
C)  regulatory capture. 
D)  deadweight loss.

Question 9

A horizontal merger is one in which the merging firms:

Accepted Answer

A)  are about the same size. 
B)  produce the same good in the same industry. 
C)  will control greater than 50 percent of the market. 
D)  have never directly competed in the past. 
A)  are about the same size. 
B)  produce the same good in the same industry. 
C)  will control greater than 50 percent of the market. 
D)  have never directly competed in the past.

Question 10

Interlocking directorates are illegal under the ____ whether or not the effect may be to substantially lessen competition.

Accepted Answer

A)  Clayton Act 
B)  Robinson-Patman Act 
C)  Sherman Antitrust Act 
D)  Federal Trade Commission Act 
A)  Clayton Act 
B)  Robinson-Patman Act 
C)  Sherman Antitrust Act 
D)  Federal Trade Commission Act

Question 11

Exhibit 13-3 A monopolist
 
In Exhibit 13-3, if this industry is regulated and the regulatory commission sets price equal to average total cost, then:

Accepted Answer

A)  this firm would earn excess profit. 
B)  total revenue would equal marginal revenue. 
C)  the firm would suffer losses. 
D)  revenue would just be sufficient to cover costs. 
A)  this firm would earn excess profit. 
B)  total revenue would equal marginal revenue. 
C)  the firm would suffer losses. 
D)  revenue would just be sufficient to cover costs.

Question 12

According to the per se rule, when would the courts find a monopoly in violation of the Sherman Antitrust Act?

Accepted Answer

A)  Always-monopoly is per se illegal under the rule of reason. 
B)  Only when the monopoly created negative externalities. 
C)  Only when the monopoly engaged in illegal business practices. 
D)  Only when the monopoly charged excessively high prices. 
A)  Always-monopoly is per se illegal under the rule of reason. 
B)  Only when the monopoly created negative externalities. 
C)  Only when the monopoly engaged in illegal business practices. 
D)  Only when the monopoly charged excessively high prices.

Question 13

Exhibit 13-1 Cable television monopolist
 
As shown in Exhibit 13-1, an unregulated cable television monopolist would operate at which point on its demand curve:

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 14

The antitrust case against IBM was dropped after 13 years of litigation because

Accepted Answer

A)  the Celler-Kefauver Act was passed and it changed the relevant antitrust rules. 
B)  IBM proved that the firm did not commit bad acts. 
C)  antitrust laws shifted from a rule of reason to a per se rule. 
D)  new companies began competing in the market and the political environment changed to a less restrictive interpretation of antitrust laws. 
A)  the Celler-Kefauver Act was passed and it changed the relevant antitrust rules. 
B)  IBM proved that the firm did not commit bad acts. 
C)  antitrust laws shifted from a rule of reason to a per se rule. 
D)  new companies began competing in the market and the political environment changed to a less restrictive interpretation of antitrust laws.

Question 15

A merger between firms that compete in the same market is called a:

Accepted Answer

A)  horizontal merger. 
B)  vertical merger. 
C)  conglomerate merger. 
D)  monopoly. 
A)  horizontal merger. 
B)  vertical merger. 
C)  conglomerate merger. 
D)  monopoly.

Question 16

Exhibit 13-3 A monopolist
 
In Exhibit 13-3, if this industry is regulated and the regulatory commission wants revenue to just cover cost, the proper price and output combination to be set is:

Accepted Answer

A)  price = $10; output = 25. 
B)  price = $8; output = 30. 
C)  price = $5; output = 40. 
D)  price = $4; output = 25. 
A)  price = $10; output = 25. 
B)  price = $8; output = 30. 
C)  price = $5; output = 40. 
D)  price = $4; output = 25.

Question 17

The Interstate Commerce Commission (ICC) was established in 1887 to regulate:

Accepted Answer

A)  banking. 
B)  railroads and all surface transportation. 
C)  nationwide advertising. 
D)  interstate sales of food and drugs. 
A)  banking. 
B)  railroads and all surface transportation. 
C)  nationwide advertising. 
D)  interstate sales of food and drugs.

Question 18

A local cable company has its rates set at P = $15 by a regulatory commission. Its current output is 10,000 households and its costs are as follows: ATC = $17; AVC = $14; and MC = $15. From this, we can tell that this is:

Accepted Answer

A)  a fair price, and the firm earns a normal profit. 
B)  a fair price, and the firm earns an economic loss. 
C)  marginal cost pricing, and the firm earns a normal profit. 
D)  marginal cost pricing, and the firm earns an economic loss. 
A)  a fair price, and the firm earns a normal profit. 
B)  a fair price, and the firm earns an economic loss. 
C)  marginal cost pricing, and the firm earns a normal profit. 
D)  marginal cost pricing, and the firm earns an economic loss.

Question 19

Imperfect knowledge about hazardous effects of a product will likely result in

Accepted Answer

A)  insufficient resources devoted to producing a product. 
B)  consumers paying too high a price for a product. 
C)  underconsumption of a product. 
D)  the formation of trusts among firms. 
A)  insufficient resources devoted to producing a product. 
B)  consumers paying too high a price for a product. 
C)  underconsumption of a product. 
D)  the formation of trusts among firms.

Question 20

Economists believe that government regulation to prevent companies from making false or deceptive claims may be justified when:

Accepted Answer

A)  consumers already have complete information about the product due to other market forces. 
B)  the equilibrium quantity and price are lower than they would be if consumers had complete information. 
C)  the equilibrium quantity and price are higher than they would be if consumers had complete information. 
D)  the equilibrium quantity and price are equal to the values they would take if consumers had complete information. 
A)  consumers already have complete information about the product due to other market forces. 
B)  the equilibrium quantity and price are lower than they would be if consumers had complete information. 
C)  the equilibrium quantity and price are higher than they would be if consumers had complete information. 
D)  the equilibrium quantity and price are equal to the values they would take if consumers had complete information.

Exam 13: Antitrust and Regulation

When consumers in a market become fully informed of negative information about the product, we can expect the

The task of economic regulation is to:

Deregulation, especially for the transportation and telecommunication industries, was the trend in the United States during the:

A merger between two firms with unrelated products is a

Under a rule of reason approach, which of the following would be legal in the United States?

In the 1945 Alcoa antitrust case, the Court found Alcoa:

In which of the following cases was the firm a natural monopoly at the beginning of the case but no longer a natural monopoly when the case resolved?

A market failure that causes overconsumption of a product because the sellers know something negative about a product that the buyers do not know is called

A horizontal merger is one in which the merging firms:

Interlocking directorates are illegal under the ____ whether or not the effect may be to substantially lessen competition.

Exhibit 13-3 A monopolist In Exhibit 13-3, if this industry is regulated and the regulatory commission sets price equal to average total cost, then:

According to the per se rule, when would the courts find a monopoly in violation of the Sherman Antitrust Act?

Exhibit 13-1 Cable television monopolist As shown in Exhibit 13-1, an unregulated cable television monopolist would operate at which point on its demand curve:

The antitrust case against IBM was dropped after 13 years of litigation because

A merger between firms that compete in the same market is called a:

Exhibit 13-3 A monopolist In Exhibit 13-3, if this industry is regulated and the regulatory commission wants revenue to just cover cost, the proper price and output combination to be set is:

The Interstate Commerce Commission (ICC) was established in 1887 to regulate:

A local cable company has its rates set at P = $15 by a regulatory commission. Its current output is 10,000 households and its costs are as follows: ATC = $17; AVC = $14; and MC = $15. From this, we can tell that this is:

Imperfect knowledge about hazardous effects of a product will likely result in

Economists believe that government regulation to prevent companies from making false or deceptive claims may be justified when:

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Environmental Economics

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Understanding Direct and Inverse Relationships between Variables

Filters