Question 1

A "consent decree" is one way in which an enterprise may avoid antitrust prosecution.

Accepted Answer

A) True 
 B)False

Question 2

When competing power blocs exist within an oligopolistic industry,

Accepted Answer

A)  concentration ratios are low 
B)  the laissez-faire approach can be justified 
C)  prices are higher than under monopoly 
D)  nationalization is necessary 
E)  contestable markets exist by definition 
A)  concentration ratios are low 
B)  the laissez-faire approach can be justified 
C)  prices are higher than under monopoly 
D)  nationalization is necessary 
E)  contestable markets exist by definition

Question 3

The government is undertaking a policy to deal with a monopoly. As a result, the monopoly's ATC curve is shifting upward. Most likely, which of the following policies is being used?

Accepted Answer

A)  antitrust action 
B)  a regulatory commission sets a fair price 
C)  a regulatory commission sets a price equal to marginal cost 
D)  laissez-faire 
E)  encouraging concentration 
A)  antitrust action 
B)  a regulatory commission sets a fair price 
C)  a regulatory commission sets a price equal to marginal cost 
D)  laissez-faire 
E)  encouraging concentration

Question 4

If a natural monopoly is subject to fair price regulation, it will require a subsidy to remain in business.

Accepted Answer

A) True 
 B)False

Question 5

In a perfectly balanced oligopoly (with eight firms, all having the same market share), if any one firm captures 1 percent of the market from one of the others,

Accepted Answer

A)  c and d 
B)  the eight-firm concentration ratio will increase 
C)  the eight-firm concentration ratio will decrease 
D)  the Herfindahl-Hirschman index will rise 
E)  the Herfindahl-Hirschman index will fall 
A)  c and d 
B)  the eight-firm concentration ratio will increase 
C)  the eight-firm concentration ratio will decrease 
D)  the Herfindahl-Hirschman index will rise 
E)  the Herfindahl-Hirschman index will fall

Question 6

A natural monopoly has _________, but will __________ if left unregulated.

Accepted Answer

A)  exclusive access to a natural resource; price competitively 
B)  exclusive access to a natural resource; not maximize profit 
C)  low average total cost; have high marginal costs 
D)  low average total cost; charge a high price 
E)  low average total cost; undercut its competitors 
A)  exclusive access to a natural resource; price competitively 
B)  exclusive access to a natural resource; not maximize profit 
C)  low average total cost; have high marginal costs 
D)  low average total cost; charge a high price 
E)  low average total cost; undercut its competitors

Question 7

Deregulation is a process that undoes regulation.

Accepted Answer

A) True 
 B)False

Question 8

Which one of the following statements about policies to deal with monopoly is true?

Accepted Answer

A)  There is no consensus among economists about the best way to deal with monopoly and oligopoly. 
B)  Economists agree that antitrust is best. 
C)  Economists agree that government regulation is best. 
D)  Economists agree that nationalization is best. 
E)  Economists agree that laissez-faire is best. 
A)  There is no consensus among economists about the best way to deal with monopoly and oligopoly. 
B)  Economists agree that antitrust is best. 
C)  Economists agree that government regulation is best. 
D)  Economists agree that nationalization is best. 
E)  Economists agree that laissez-faire is best.

Question 9

The Department of Justice guidelines call for government intervention inmergers when the Herfindahl-Hirschman Index in that industry is

Accepted Answer

A)  0 
B)  less than 100 
C)  between 1,000 and 1,800 
D)  less than 1,800 
E)  more than 1,800 
A)  0 
B)  less than 100 
C)  between 1,000 and 1,800 
D)  less than 1,800 
E)  more than 1,800

Question 10

Suppose there are two industries, A and B. Suppose that mergers are proposed in both industries, and the Herfindahl-Hirschman Index would increase by 500 in each one. If antitrust officials allow the mergers in industry A but challenge the mergers in industry B, the most likely explanation is that

Accepted Answer

A)  there are political motivations to antitrust enforcement 
B)  industry A was already less competitive than industry B 
C)  industry A had a balanced oligopoly and industry B did not 
D)  industry A started as a more competitive industry than B 
E)  antitrust authorities made a random decision 
A)  there are political motivations to antitrust enforcement 
B)  industry A was already less competitive than industry B 
C)  industry A had a balanced oligopoly and industry B did not 
D)  industry A started as a more competitive industry than B 
E)  antitrust authorities made a random decision

Question 11

The Massachusetts Turnpike is a state toll-road where cars and trucks pay a fee in proportion to the distance they travel and the weight of the vehicle. The road was built with federal funds in the 1960s, but the state must pay for maintenance. Given what youknow about regulation, what do you think the toll charge for a particular car or truckrepresents?

Accepted Answer

A)  the average variable cost of maintenance 
B)  the marginal cost of maintenance 
C)  the monopoly price 
D)  price discrimination against bus passengers 
E)  a lump-sum tax 
A)  the average variable cost of maintenance 
B)  the marginal cost of maintenance 
C)  the monopoly price 
D)  price discrimination against bus passengers 
E)  a lump-sum tax

Question 12

Antitrust legislation prohibits a person from being on the board of directors of more than one firm at any time.

Accepted Answer

A) True 
 B)False

Question 13

A big problem with fair pricing schemes is that

Accepted Answer

A)  output is lower than if the market were competitive 
B)  prices are higher than if the market were competitive 
C)  firms have no incentive to control costs 
D)  efficiencies result from lack of profit motive 
E)  the marginal cost may not be very low 
A)  output is lower than if the market were competitive 
B)  prices are higher than if the market were competitive 
C)  firms have no incentive to control costs 
D)  efficiencies result from lack of profit motive 
E)  the marginal cost may not be very low

Question 14

The purchase of voting stock by a competing firm is illegal in the United States.

Accepted Answer

A) True 
 B)False

Question 15

Contestability of markets depends crucially upon

Accepted Answer

A)  the nationalization of these markets 
B)  large economies of scale 
C)  strong brand loyalty for existing firms 
D)  the presence of natural monopoly 
E)  the ability of new firms to enter the market 
A)  the nationalization of these markets 
B)  large economies of scale 
C)  strong brand loyalty for existing firms 
D)  the presence of natural monopoly 
E)  the ability of new firms to enter the market

Question 16

Under current antitrust laws, conglomerates are

Accepted Answer

A)  illegal per se 
B)  legal in the United States, but illegal internationally 
C)  immune from prosecution 
D)  legal only if they can show they are efficient 
E)  illegal when necessities such as food are involved 
A)  illegal per se 
B)  legal in the United States, but illegal internationally 
C)  immune from prosecution 
D)  legal only if they can show they are efficient 
E)  illegal when necessities such as food are involved

Question 17

A busy country store is the only producer and distributor of maple sausages in New Hampshire. It calculates that if it sets MR = MC, it will sell 2,000 sausages at a price of $10 and make a total economic profit of $6,000. Instead, the store decides to charge a price of $8. We can infer that the store

Accepted Answer

A)  is lowering the price so that it can earn more than $6,000 total profit 
B)  is operating in a contestable market so it is pricing the sausages to keep out competition 
C)  will now sell fewer sausages according to the law of demand 
D)  is now operating at a loss of $1 per sausage 
E)  hopes that its demand is inelastic so that total revenue will increase 
A)  is lowering the price so that it can earn more than $6,000 total profit 
B)  is operating in a contestable market so it is pricing the sausages to keep out competition 
C)  will now sell fewer sausages according to the law of demand 
D)  is now operating at a loss of $1 per sausage 
E)  hopes that its demand is inelastic so that total revenue will increase

Question 18

A firm, judged to be a natural monopoly in a small rural market like Centerville, may be considered monopolistically competitive in a market such as New York City.

Accepted Answer

A) True 
 B)False

Question 19

The most difficult type of merger to attack under the antitrust laws is the _________merger.

Accepted Answer

A)  horizontal 
B)  vertical 
C)  conglomerate 
D)  joint venture 
E)  per se 
A)  horizontal 
B)  vertical 
C)  conglomerate 
D)  joint venture 
E)  per se

Question 20

Many economists believe there is a good chance that if the government had not taken over passenger rail service, Amtrak would

Accepted Answer

A)  be making economic profits today 
B)  be facing competition from numerous other rail systems 
C)  provide services that generate significant tax revenues 
D)  not exist at all today 
E)  operate in the long run at a loss to private firms 
A)  be making economic profits today 
B)  be facing competition from numerous other rail systems 
C)  provide services that generate significant tax revenues 
D)  not exist at all today 
E)  operate in the long run at a loss to private firms

A "consent decree" is one way in which an enterprise may avoid antitrust prosecution.

When competing power blocs exist within an oligopolistic industry,

The government is undertaking a policy to deal with a monopoly. As a result, the monopoly's ATC curve is shifting upward. Most likely, which of the following policies is being used?

If a natural monopoly is subject to fair price regulation, it will require a subsidy to remain in business.

In a perfectly balanced oligopoly (with eight firms, all having the same market share), if any one firm captures 1 percent of the market from one of the others,

A natural monopoly has _, but will __ if left unregulated.

Deregulation is a process that undoes regulation.

Which one of the following statements about policies to deal with monopoly is true?

The Department of Justice guidelines call for government intervention inmergers when the Herfindahl-Hirschman Index in that industry is

Suppose there are two industries, A and B. Suppose that mergers are proposed in both industries, and the Herfindahl-Hirschman Index would increase by 500 in each one. If antitrust officials allow the mergers in industry A but challenge the mergers in industry B, the most likely explanation is that

Antitrust legislation prohibits a person from being on the board of directors of more than one firm at any time.

A big problem with fair pricing schemes is that

The purchase of voting stock by a competing firm is illegal in the United States.

Contestability of markets depends crucially upon

Under current antitrust laws, conglomerates are

A firm, judged to be a natural monopoly in a small rural market like Centerville, may be considered monopolistically competitive in a market such as New York City.

The most difficult type of merger to attack under the antitrust laws is the _________merger.

Many economists believe there is a good chance that if the government had not taken over passenger rail service, Amtrak would

Introduction

Production Possibilities and Opportunity Costs

Demand and Supply

Elasticity

Happiness, Utility, and Consumer Choice

Price Ceilings and Price Floors

Entrepreneurship and Business Ownership

Costs of Production

Maximizing Profit

Identifying Markets and Market Structures

Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

Price and Output Determination Under Oligopoly

Externalities, Market Failure, and Public Choice

Wage Rates in Competitive Labor Markets

Wages and Employment: Monopsony and Labor Unions

Interest, Rent, and Profit

Income Distribution and Poverty

International Trade

Exchange Rates, Balance of Payments, and International Debt

The Economic Problems of Less-Developed Economies

Filters

Exam 13: Antitrust and Regulation

A "consent decree" is one way in which an enterprise may avoid antitrust prosecution.

When competing power blocs exist within an oligopolistic industry,

The government is undertaking a policy to deal with a monopoly. As a result, the monopoly's ATC curve is shifting upward. Most likely, which of the following policies is being used?

If a natural monopoly is subject to fair price regulation, it will require a subsidy to remain in business.

In a perfectly balanced oligopoly (with eight firms, all having the same market share), if any one firm captures 1 percent of the market from one of the others,

A natural monopoly has _________, but will __________ if left unregulated.

Deregulation is a process that undoes regulation.

Which one of the following statements about policies to deal with monopoly is true?

The Department of Justice guidelines call for government intervention inmergers when the Herfindahl-Hirschman Index in that industry is

Suppose there are two industries, A and B. Suppose that mergers are proposed in both industries, and the Herfindahl-Hirschman Index would increase by 500 in each one. If antitrust officials allow the mergers in industry A but challenge the mergers in industry B, the most likely explanation is that

Antitrust legislation prohibits a person from being on the board of directors of more than one firm at any time.

A big problem with fair pricing schemes is that

The purchase of voting stock by a competing firm is illegal in the United States.

Contestability of markets depends crucially upon

Under current antitrust laws, conglomerates are

A firm, judged to be a natural monopoly in a small rural market like Centerville, may be considered monopolistically competitive in a market such as New York City.

The most difficult type of merger to attack under the antitrust laws is the _________merger.

Many economists believe there is a good chance that if the government had not taken over passenger rail service, Amtrak would

Introduction

Production Possibilities and Opportunity Costs

Demand and Supply

Elasticity

Happiness, Utility, and Consumer Choice

Price Ceilings and Price Floors

Entrepreneurship and Business Ownership

Costs of Production

Maximizing Profit

Identifying Markets and Market Structures

Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

Price and Output Determination Under Oligopoly

Externalities, Market Failure, and Public Choice

Wage Rates in Competitive Labor Markets

Wages and Employment: Monopsony and Labor Unions

Interest, Rent, and Profit

Income Distribution and Poverty

International Trade

Exchange Rates, Balance of Payments, and International Debt

The Economic Problems of Less-Developed Economies

Filters

A natural monopoly has _, but will __ if left unregulated.