Question 1

Marginal cost pricing is a system of pricing in which the price charged equals the marginal cost of:

Accepted Answer

A)  the last unit produced and the firm earns zero profit. 
B)  each unit produced and the firm earns zero profit. 
C)  the last unit produced and the firm suffers a loss unless the government gives the firm a subsidy. 
D)  the profit-maximization unit and the firm earns an economic profit. 
A)  the last unit produced and the firm earns zero profit. 
B)  each unit produced and the firm earns zero profit. 
C)  the last unit produced and the firm suffers a loss unless the government gives the firm a subsidy. 
D)  the profit-maximization unit and the firm earns an economic profit.

Question 2

If a good causes a positive externality, regulation might take the form of a

Accepted Answer

A)  subsidy. 
B)  ban on the product. 
C)  tax. 
D)  price floor. 
A)  subsidy. 
B)  ban on the product. 
C)  tax. 
D)  price floor.

Question 3

If a good causes a negative externality, regulation might take the form of a

Accepted Answer

A)  tax. 
B)  requirement for consumption. 
C)  subsidy. 
D)  price ceiling. 
A)  tax. 
B)  requirement for consumption. 
C)  subsidy. 
D)  price ceiling.

Question 4

Suppose Well-Made Pharmaceuticals knows that its newest prescription drug can cause severe side-effects, but it doesn't inform the users of the prescriptions about these side-effects. When the side-effects become public knowledge after an investigation,

Accepted Answer

A)  the demand curve will shift to the right. 
B)  the price will decrease. 
C)  the supply curve will shift to the left. 
D)  the quantity will increase. 
A)  the demand curve will shift to the right. 
B)  the price will decrease. 
C)  the supply curve will shift to the left. 
D)  the quantity will increase.

Question 5

In the Utah Pie case, the economic effect of the Supreme Court decision was to:

Accepted Answer

A)  prohibit the merger of two small pie companies. 
B)  encourage competition by ruling that the national competitors had engaged in illegal price discrimination. 
C)  encourage competition by ruling that the national competitors had not engaged in illegal price discrimination. 
D)  discourage competition by national competitors in the Salt Lake City market. 
A)  prohibit the merger of two small pie companies. 
B)  encourage competition by ruling that the national competitors had engaged in illegal price discrimination. 
C)  encourage competition by ruling that the national competitors had not engaged in illegal price discrimination. 
D)  discourage competition by national competitors in the Salt Lake City market.

Question 6

The practice of firms temporarily reducing prices in order to eliminate competition is called:

Accepted Answer

A)  competitive pricing. 
B)  predatory pricing. 
C)  discount pricing. 
D)  strategic pricing. 
A)  competitive pricing. 
B)  predatory pricing. 
C)  discount pricing. 
D)  strategic pricing.

Question 7

If a firm offers quantity discounts or special promotional allowances only to favored distributors and the effect is to substantially lessen competition, then it is in violation of the:

Accepted Answer

A)  Clayton Act. 
B)  Robinson-Patman Act. 
C)  Sherman Antitrust Act. 
D)  Celler-Kefauver Act. 
A)  Clayton Act. 
B)  Robinson-Patman Act. 
C)  Sherman Antitrust Act. 
D)  Celler-Kefauver Act.

Question 8

Government regulators can achieve efficiency for a natural monopoly by setting a price ceiling equal to the intersection of the demand curve and the:

Accepted Answer

A)  marginal revenue curve. 
B)  average cost curve. 
C)  marginal cost curve. 
D)  average fixed cost curve. 
A)  marginal revenue curve. 
B)  average cost curve. 
C)  marginal cost curve. 
D)  average fixed cost curve.

Question 9

Under a per se approach to the antitrust laws,

Accepted Answer

A)  the government must prove some anticompetitive outcome from the act. 
B)  large size alone can be an antitrust violation. 
C)  the action will pass antitrust scrutiny if it is shown to be reasonable. 
D)  the only real question is whether the prices charged are reasonable. 
A)  the government must prove some anticompetitive outcome from the act. 
B)  large size alone can be an antitrust violation. 
C)  the action will pass antitrust scrutiny if it is shown to be reasonable. 
D)  the only real question is whether the prices charged are reasonable.

Question 10

The Utah Pie case was brought under which of the following laws?

Accepted Answer

A)  The Sherman Antitrust Act. 
B)  The Federal Trade Commission Act. 
C)  The Robinson-Patman Act. 
D)  The Celler-Kefauver Act. 
A)  The Sherman Antitrust Act. 
B)  The Federal Trade Commission Act. 
C)  The Robinson-Patman Act. 
D)  The Celler-Kefauver Act.

Question 11

Exhibit 13-4: Market for Healthy Hands Lotion
 
​
In Exhibit 13-4, the makers of Healthy Hands Lotion discovered that the lotion ca n cause skin reactions, but it doesn't inform the buyers. A news investigation reveals the reactions. When the market reacts to this new information, the price will

Accepted Answer

A)  increase from $4.00 to $5.00 and the quantity will increase from 40 to 50 units. 
B)  decrease from $5.00 to $4.00 and the quantity will decrease from 50 to 40 units. 
C)  increase from $4.00 to $6.00 and the quantity will remain constant at 40 units. 
D)  decrease from $6.00 to $5.00 and the quantity will increase from 40 to 50 units. 
A)  increase from $4.00 to $5.00 and the quantity will increase from 40 to 50 units. 
B)  decrease from $5.00 to $4.00 and the quantity will decrease from 50 to 40 units. 
C)  increase from $4.00 to $6.00 and the quantity will remain constant at 40 units. 
D)  decrease from $6.00 to $5.00 and the quantity will increase from 40 to 50 units.

Question 12

The per se rule was an antitrust law guideline that emphasized ____ over ____.

Accepted Answer

A)  price; quantity 
B)  quantity; price 
C)  behavior; size 
D)  size; behavior 
A)  price; quantity 
B)  quantity; price 
C)  behavior; size 
D)  size; behavior

Question 13

Which of the following would be illegal under the Clayton Act?

Accepted Answer

A)  Executives from Nike and Reebok meet to fix the price of athletic shoes. 
B)  Ford and Firestone Tire agree to merge. 
C)  Xerox will only sell its copy and print machines if buyers agree to also buy a service contract. 
D)  Healthy Energy Bar Co. falsified a study showing the health benefits of its product and uses that study in its advertising. 
A)  Executives from Nike and Reebok meet to fix the price of athletic shoes. 
B)  Ford and Firestone Tire agree to merge. 
C)  Xerox will only sell its copy and print machines if buyers agree to also buy a service contract. 
D)  Healthy Energy Bar Co. falsified a study showing the health benefits of its product and uses that study in its advertising.

Question 14

An economist would be  most  likely to advocate for regulation under which of the following scenarios?

Accepted Answer

A)  It was politically popular. 
B)  Scientific evidence suggested regulation was an appropriate solution. 
C)  There was a strong philosophical argument in favor of regulation. 
D)  Never. Economists find all regulation to be inefficient. 
A)  It was politically popular. 
B)  Scientific evidence suggested regulation was an appropriate solution. 
C)  There was a strong philosophical argument in favor of regulation. 
D)  Never. Economists find all regulation to be inefficient.

Question 15

The Department of Justice has challenged the merger of two firms, and the case has ended up in the Supreme Court. The two firms argue that they will not use their monopoly power to raise prices or to cut output. Under what judicial standard would their merger be allowed, and under what judicial standard would their merger be disallowed?

Accepted Answer

The merger would be allowed under the ru

Question 16

Which of the following is not one of the three basic situations in which regulation is imposed?

Accepted Answer

A)  price fixing 
B)  natural monopoly 
C)  externalities 
D)  imperfect information 
A)  price fixing 
B)  natural monopoly 
C)  externalities 
D)  imperfect information

Question 17

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

Accepted Answer

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

Question 18

Which of the following would be illegal under the Robinson-Patman Act?

Accepted Answer

A)  Ford and General Motors meet to fix the price of cars. 
B)  ExxonMobil and BP Oil elect the same person to their boards of directors. 
C)  General Mills and Kelloggs decide to merge. 
D)  ExxonMobil sells gas at a higher wholesale price to independent gas retailers than to ExxonMobil retailers. 
A)  Ford and General Motors meet to fix the price of cars. 
B)  ExxonMobil and BP Oil elect the same person to their boards of directors. 
C)  General Mills and Kelloggs decide to merge. 
D)  ExxonMobil sells gas at a higher wholesale price to independent gas retailers than to ExxonMobil retailers.

Question 19

The Federal Trade Commission is charged with:

Accepted Answer

A)  supervising cartels in the United States. 
B)  aiding small business in contract negotiations with foreign companies. 
C)  investigating unfair and deceptive trade practices. 
D)  approving contracts between businesses and government. 
A)  supervising cartels in the United States. 
B)  aiding small business in contract negotiations with foreign companies. 
C)  investigating unfair and deceptive trade practices. 
D)  approving contracts between businesses and government.

Question 20

A conglomerate occurs when:

Accepted Answer

A)  the products of the merging firms were not related in any manner before the merger. 
B)  the merger partners were competitors. 
C)  one firm is a domestic firm, and the other is a foreign company. 
D)  the firms stood in a buyer-seller relationship before the merger. 
A)  the products of the merging firms were not related in any manner before the merger. 
B)  the merger partners were competitors. 
C)  one firm is a domestic firm, and the other is a foreign company. 
D)  the firms stood in a buyer-seller relationship before the merger.

Exam 13: Antitrust and Regulation

Marginal cost pricing is a system of pricing in which the price charged equals the marginal cost of:

If a good causes a positive externality, regulation might take the form of a

If a good causes a negative externality, regulation might take the form of a

Suppose Well-Made Pharmaceuticals knows that its newest prescription drug can cause severe side-effects, but it doesn't inform the users of the prescriptions about these side-effects. When the side-effects become public knowledge after an investigation,

In the Utah Pie case, the economic effect of the Supreme Court decision was to:

The practice of firms temporarily reducing prices in order to eliminate competition is called:

If a firm offers quantity discounts or special promotional allowances only to favored distributors and the effect is to substantially lessen competition, then it is in violation of the:

Government regulators can achieve efficiency for a natural monopoly by setting a price ceiling equal to the intersection of the demand curve and the:

Under a per se approach to the antitrust laws,

The Utah Pie case was brought under which of the following laws?

Exhibit 13-4: Market for Healthy Hands Lotion ​ In Exhibit 13-4, the makers of Healthy Hands Lotion discovered that the lotion ca n cause skin reactions, but it doesn't inform the buyers. A news investigation reveals the reactions. When the market reacts to this new information, the price will

The per se rule was an antitrust law guideline that emphasized ____ over ____.

Which of the following would be illegal under the Clayton Act?

An economist would be most likely to advocate for regulation under which of the following scenarios?

Which of the following is not one of the three basic situations in which regulation is imposed?

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

Which of the following would be illegal under the Robinson-Patman Act?

The Federal Trade Commission is charged with:

A conglomerate occurs 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

Exhibit 13-4: Market for Healthy Hands Lotion In Exhibit 13-4, the makers of Healthy Hands Lotion discovered that the lotion ca n cause skin reactions, but it doesn't inform the buyers. A news investigation reveals the reactions. When the market reacts to this new information, the price will

The per se rule was an antitrust law guideline that emphasized over .