Question 1

A trust is an organizational structure that allows firms in an oligopolistic industry to operate as a cartel.

Accepted Answer

A) True 
 B)False  True

Question 2

Presence of negative externalities causes the market equilibrium quantity of the product to be (relative to what is socially optimal)

Accepted Answer

A)  Too high 
B)  Too low 
C)  Just right 
D)  Not enough information is provided 
A)  Too high 
B)  Too low 
C)  Just right 
D)  Not enough information is provided A

Question 3

The market demand for the output of a public utility is:
 $$Q D = 250 - 2 P$$ The firm's long-run average cost and long-run marginal cost functions are:
 $$L A C = 50 - 0.125 Q \text { and } L M C = 35 - 0.10 Q$$ (i)What price and quantity combination would result if the firm was not regulated? How much profit would the firm earn?
(ii)What price and quantity combination would result if the firm was regulated at a price that resulted in an economic profit of zero?
(iii)What price and quantity combination would result if the firm was regulated at a price that resulted in the socially optimal level of output? How much profit would the firm earn?

Accepted Answer

(i) $M R = 125 - Q = 35 - 0.10 Q = L M C$ so $Q = 100 , P = 75$, and profit is 
equal to $( 75 ) ( 100 ) - ( 100 ) ( 50 - \{ 0.125 \} \{ 100 \} ) = 3,750$ $$\text { (ii) } P = 125 - 0.50 Q = 50 - 0.125 Q = L A C \text { so } Q = 200 \text { and } P = 25$$ (iii) $P = 125 - 0.50 Q = 35 - 0.10 Q = L M C$ so $Q = 225 , P = 12.50$, and profit 
is equal to $( 12.50 ) ( 225 ) - ( 225 ) ( 50 - \{ 0.125 \} \{ 225 \} ) = - 2,109.375$

Question 4

Government can correct for external diseconomies of production by subsidizing production.

Accepted Answer

A) True 
 B)False

Question 5

Domestic market for wheat is described by the following functions:
The rest of the world price is $2.
What is the equilibrium price and quantity in the domestic market assuming no trade with rest of the world?
What is the equilibrium price and quantity in the domestic market if trade opens?
What happens to the domestic price if an import tariff of $1 per bushel is introduced?

Accepted Answer

The answer of Domestic market for wheat is described by...

Question 6

A firm that uses profits earned in one market to sell a product or service below its average variable cost in another market is engaged in

Accepted Answer

A)  conscious parallelism. 
B)  predatory pricing. 
C)  voluntary export restraint. 
D)  an injunction. 
A)  conscious parallelism. 
B)  predatory pricing. 
C)  voluntary export restraint. 
D)  an injunction.

Question 7

Which of the following made monopolization and restraint of trade illegal?

Accepted Answer

A)  Robinson-Patman Act 
B)  Sherman Act 
C)  Clayton Act 
D)  None of the above is correct. 
A)  Robinson-Patman Act 
B)  Sherman Act 
C)  Clayton Act 
D)  None of the above is correct.

Question 8

Which of the following is a device that controls imports and generates government revenue?

Accepted Answer

A)  Import quotas 
B)  Voluntary export restraints 
C)  Tariffs 
D)  Value-added taxes 
A)  Import quotas 
B)  Voluntary export restraints 
C)  Tariffs 
D)  Value-added taxes

Question 9

Externalities refer to the side effects of production or consumption that cause private and social costs to differ.

Accepted Answer

A) True 
 B)False

Question 10

If the consumption expenditures of some individuals impose uncompensated costs on other individuals, these costs are referred to as

Accepted Answer

A)  external diseconomies of production. 
B)  external economies of production. 
C)  external diseconomies of consumption. 
D)  external economies of consumption. 
A)  external diseconomies of production. 
B)  external economies of production. 
C)  external diseconomies of consumption. 
D)  external economies of consumption.

Question 11

Which of the following can be regarded as an anticompetitive conduct?

Accepted Answer

A)  Price collusion 
B)  Conscious parallelism 
C)  Charging low prices 
D)  Price discrimination 
A)  Price collusion 
B)  Conscious parallelism 
C)  Charging low prices 
D)  Price discrimination

Question 12

Taxes on consumption, such as those used in European countries, encourage saving and investment.

Accepted Answer

A) True 
 B)False

Question 13

Domestic market for oil is described by the following functions:
The rest of the world price is $40.
What is the equilibrium price and quantity in the domestic market assuming no trade with rest of the world?
What is the equilibrium price and quantity in the domestic market if trade opens?
What happens to imports if an import tariff of $1 per barrel is introduced?

Accepted Answer

The answer of Domestic market for oil is described by...

Question 14

Most antitrust suits filed in the United States are initiated by either the Department of Homeland Security or the Federal Trade Commission (FTC).

Accepted Answer

A) True 
 B)False

Question 15

Price collusion among firms may be prohibited by antitrust laws only if it is found that consumers are harmed.

Accepted Answer

A) True 
 B)False

Question 16

Use the following to answer questions below :  
-Refer to the graph of marginal private cost (MPC) and marginal private benefit (MPB). If production of this good gives rise to an external social benefit equal to $1 per unit produced, what is the socially optimal level of output?

Accepted Answer

A)  4 
B)  5 
C)  6 
D)  7 
A)  4 
B)  5 
C)  6 
D)  7

Question 17

If an increase in output by a firm confers uncompensated benefits to other firms, these benefits are referred to as

Accepted Answer

A)  external diseconomies of production. 
B)  external economies of production. 
C)  external diseconomies of consumption. 
D)  external economies of consumption. 
A)  external diseconomies of production. 
B)  external economies of production. 
C)  external diseconomies of consumption. 
D)  external economies of consumption.

Question 18

Market failure can be best described as a situation in which

Accepted Answer

A)  market participants do not act rationally. 
B)  market participants fail to achieve their goals. 
C)  the allocation of goods and services is optimal. 
D)  the allocation of goods and services is not efficient. 
A)  market participants do not act rationally. 
B)  market participants fail to achieve their goals. 
C)  the allocation of goods and services is optimal. 
D)  the allocation of goods and services is not efficient.

Question 19

Presence of negative externalities causes the market equilibrium price of the product to be (relative to what is socially optimal)

Accepted Answer

A)  Too high 
B)  Too low 
C)  Just right 
D)  Not enough information is provided 
A)  Too high 
B)  Too low 
C)  Just right 
D)  Not enough information is provided

Question 20

Regulation that guarantees a normal rate of return on investment gives public utilities a strong incentive to keep costs down.

Accepted Answer

A) True 
 B)False

A trust is an organizational structure that allows firms in an oligopolistic industry to operate as a cartel.

Presence of negative externalities causes the market equilibrium quantity of the product to be (relative to what is socially optimal)

Government can correct for external diseconomies of production by subsidizing production.

A firm that uses profits earned in one market to sell a product or service below its average variable cost in another market is engaged in

Which of the following made monopolization and restraint of trade illegal?

Which of the following is a device that controls imports and generates government revenue?

Externalities refer to the side effects of production or consumption that cause private and social costs to differ.

If the consumption expenditures of some individuals impose uncompensated costs on other individuals, these costs are referred to as

Which of the following can be regarded as an anticompetitive conduct?

Taxes on consumption, such as those used in European countries, encourage saving and investment.

Most antitrust suits filed in the United States are initiated by either the Department of Homeland Security or the Federal Trade Commission (FTC).

Price collusion among firms may be prohibited by antitrust laws only if it is found that consumers are harmed.

Use the following to answer questions below : -Refer to the graph of marginal private cost (MPC) and marginal private benefit (MPB). If production of this good gives rise to an external social benefit equal to $1 per unit produced, what is the socially optimal level of output?

If an increase in output by a firm confers uncompensated benefits to other firms, these benefits are referred to as

Market failure can be best described as a situation in which

Presence of negative externalities causes the market equilibrium price of the product to be (relative to what is socially optimal)

Regulation that guarantees a normal rate of return on investment gives public utilities a strong incentive to keep costs down.

The Nature and Scope of Managerial Economics

Demand, Supply, and Equilibrium Analysis

Optimization Techniques and New Management Tools

Demand Theory

Demand Estimation

Demand Forecasting

Production Theory and Estimation

Cost Theory and Estimation

Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Oligopoly and Firm Architecture

Game Theory and Strategic Behavior

Pricing Practices

Risk Analysis

Long-Run Investment Decisions: Capital Budgeting

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Exam 13: Regulation and Antitrust: The Role of Government in the Economy

A trust is an organizational structure that allows firms in an oligopolistic industry to operate as a cartel.

Presence of negative externalities causes the market equilibrium quantity of the product to be (relative to what is socially optimal)

Government can correct for external diseconomies of production by subsidizing production.

A firm that uses profits earned in one market to sell a product or service below its average variable cost in another market is engaged in

Which of the following made monopolization and restraint of trade illegal?

Which of the following is a device that controls imports and generates government revenue?

Externalities refer to the side effects of production or consumption that cause private and social costs to differ.

If the consumption expenditures of some individuals impose uncompensated costs on other individuals, these costs are referred to as

Which of the following can be regarded as an anticompetitive conduct?

Taxes on consumption, such as those used in European countries, encourage saving and investment.

Most antitrust suits filed in the United States are initiated by either the Department of Homeland Security or the Federal Trade Commission (FTC).

Price collusion among firms may be prohibited by antitrust laws only if it is found that consumers are harmed.

Use the following to answer questions below : -Refer to the graph of marginal private cost (MPC) and marginal private benefit (MPB). If production of this good gives rise to an external social benefit equal to $1 per unit produced, what is the socially optimal level of output?

If an increase in output by a firm confers uncompensated benefits to other firms, these benefits are referred to as

Market failure can be best described as a situation in which

Presence of negative externalities causes the market equilibrium price of the product to be (relative to what is socially optimal)

Regulation that guarantees a normal rate of return on investment gives public utilities a strong incentive to keep costs down.

The Nature and Scope of Managerial Economics

Demand, Supply, and Equilibrium Analysis

Optimization Techniques and New Management Tools

Demand Theory

Demand Estimation

Demand Forecasting

Production Theory and Estimation

Cost Theory and Estimation

Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Oligopoly and Firm Architecture

Game Theory and Strategic Behavior

Pricing Practices

Risk Analysis

Long-Run Investment Decisions: Capital Budgeting

Filters