Question 1

The effects of airline deregulation in the early to mid-1980s included all of the following except the

Accepted Answer

A)  dropping of unprofitable routes 
B)  development of the hub-and-spoke system 
C)  establishment of new commuter lines 
D)  raising of airline fares 
E)  bankruptcy of some airlines 
A)  dropping of unprofitable routes 
B)  development of the hub-and-spoke system 
C)  establishment of new commuter lines 
D)  raising of airline fares 
E)  bankruptcy of some airlines

Question 2

Some economists who consider monopoly to be both inevitable and bad are inclined toward a policy of ___________ if regulation of the monopoly seems ineffectual.

Accepted Answer

A)  contestable market 
B)  price controls 
C)  countervailing power 
D)  creative destruction 
E)  nationalization 
A)  contestable market 
B)  price controls 
C)  countervailing power 
D)  creative destruction 
E)  nationalization

Question 3

A laissez-faire policy may be an effective antitrust policy if markets are

Accepted Answer

A)  c and d 
B)  d and e 
C)  oligopolistic 
D)  competitive 
E)  contestable 
A)  c and d 
B)  d and e 
C)  oligopolistic 
D)  competitive 
E)  contestable

Question 4

Which answer best describes how economists suggest we deal with monopolies and oligopolies?

Accepted Answer

A)  We should regulate them all until the markets become competitive. 
B)  We should leave them alone. 
C)  Those firms should be nationalized. 
D)  We should fully enforce all antitrust laws. 
E)  There is no consensus among economists on this issue. 
A)  We should regulate them all until the markets become competitive. 
B)  We should leave them alone. 
C)  Those firms should be nationalized. 
D)  We should fully enforce all antitrust laws. 
E)  There is no consensus among economists on this issue.

Question 5

The reason that antitrust laws exist and are enforced is because most economists and politicians believe that

Accepted Answer

A)  every industry should be perfectly competitive 
B)  monopolies do not maximize shareholder value in the long run 
C)  the price and quantity combinations delivered in a perfectly competitive market are both socially desirable and most efficient 
D)  monopolies use their market power to create economies of scale 
E)  small firms are the backbone of American society 
A)  every industry should be perfectly competitive 
B)  monopolies do not maximize shareholder value in the long run 
C)  the price and quantity combinations delivered in a perfectly competitive market are both socially desirable and most efficient 
D)  monopolies use their market power to create economies of scale 
E)  small firms are the backbone of American society

Question 6

The Court will block proposed horizontal and vertical mergers when

Accepted Answer

A)  there are many firms in the market 
B)  economies of scale exist 
C)  junk bonds are involved 
D)  the stock market is doing poorly 
E)  high market concentration already exists 
A)  there are many firms in the market 
B)  economies of scale exist 
C)  junk bonds are involved 
D)  the stock market is doing poorly 
E)  high market concentration already exists

Question 7

Economists who favor bigness in firms point to which of the following to support their argument?

Accepted Answer

A)  economies of scale 
B)  perfect competition 
C)  need for antitrust 
D)  advantages of marginal cost pricing 
E)  constant returns to scale 
A)  economies of scale 
B)  perfect competition 
C)  need for antitrust 
D)  advantages of marginal cost pricing 
E)  constant returns to scale

Question 8

Most markets in the U.S. economy are perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 9

A market cannot be contestable if

Accepted Answer

A)  very limited economies of scale exist 
B)  substantial barriers to entry exist 
C)  the market is perfectly competitive 
D)  resources can be easily acquired by new firms 
E)  products are indistinguishable 
A)  very limited economies of scale exist 
B)  substantial barriers to entry exist 
C)  the market is perfectly competitive 
D)  resources can be easily acquired by new firms 
E)  products are indistinguishable

Question 10

Since we live in a world of high concentration ratios,

Accepted Answer

A)  goods are produced at the lowest possible average total cost 
B)  perfect competition does not exist 
C)  most markets operate under conditions of monopoly 
D)  prices are at their lowest possible levels 
E)  it is an economic paradise 
A)  goods are produced at the lowest possible average total cost 
B)  perfect competition does not exist 
C)  most markets operate under conditions of monopoly 
D)  prices are at their lowest possible levels 
E)  it is an economic paradise

Question 11

Which of the following is not consistent with a goal of reducing the power of firms in the market?

Accepted Answer

A)  shortening patent life 
B)  creative destruction theory 
C)  countervailing power theory 
D)  Schumpeter's economies of scale argument 
E)  antitrust policy 
A)  shortening patent life 
B)  creative destruction theory 
C)  countervailing power theory 
D)  Schumpeter's economies of scale argument 
E)  antitrust policy

Question 12

Optimal resource allocation is achieved if P = MC.

Accepted Answer

A) True 
 B)False

Question 13

Some economists reject the idea that bigness is __________. These people believe our policy should be __________.

Accepted Answer

A)  c, d, and e 
B)  efficient or technologically superior; to encourage bigness 
C)  inevitable; to break big firms up 
D)  contestable; to contest bigness 
E)  inevitable; laissez-faire 
A)  c, d, and e 
B)  efficient or technologically superior; to encourage bigness 
C)  inevitable; to break big firms up 
D)  contestable; to contest bigness 
E)  inevitable; laissez-faire

Question 14

The primary explanation for why a regulatory commission may protect the monopoly it is supposed to regulate is that the commission members

Accepted Answer

A)  regularly receive gifts and bribes 
B)  are incompetent 
C)  are experts sympathetic to industry management 
D)  work to increase industry competition 
E)  are directly accountable to the public 
A)  regularly receive gifts and bribes 
B)  are incompetent 
C)  are experts sympathetic to industry management 
D)  work to increase industry competition 
E)  are directly accountable to the public

Question 15

The primary reason government chooses to regulate a natural monopoly is to

Accepted Answer

A)  promote its eventual nationalization 
B)  control price and output 
C)  control profit 
D)  create competition 
E)  distribute market power more evenly among the firms in the industry 
A)  promote its eventual nationalization 
B)  control price and output 
C)  control profit 
D)  create competition 
E)  distribute market power more evenly among the firms in the industry

Question 16

Government regulation of industry is designed to separate __________ from__________.

Accepted Answer

A)  profit maximization; efficiency 
B)  efficiency; output 
C)  price making; the firm 
D)  monopolies; competitors 
E)  bigness; profitability 
A)  profit maximization; efficiency 
B)  efficiency; output 
C)  price making; the firm 
D)  monopolies; competitors 
E)  bigness; profitability

Question 17

You are the mayor of your home town, and one day you arrive at city hall to find angry voters demonstrating against you. They are mad because your office created a garbage-collection monopoly by awarding only one company a permit to collect garbage in your town. The voters claim that the company is overcharging and providing poor service. They want you to do something that will lower rates and improve service. You call your staff economist, who presents evidence that there are substantial increasing economies of scale to garbage collection. What are your options if you are interested in efficiency?

Accepted Answer

Since there are substantial increasing e

Question 18

Which of the following is not an antitrust enforcement option?

Accepted Answer

A)  c and e 
B)  nationalization 
C)  laissez-faire 
D)  break ups 
E)  regulation 
A)  c and e 
B)  nationalization 
C)  laissez-faire 
D)  break ups 
E)  regulation

Question 19

When firms already in the industry produce under conditions of substantial economies of scale, entry into the industry is usually more difficult than if the firms produced without those economies of scale.

Accepted Answer

A) True 
 B)False

Question 20

The theory of creative destruction implies that too much competition leads to monopolies.

Accepted Answer

A) True 
 B)False

The effects of airline deregulation in the early to mid-1980s included all of the following except the

Some economists who consider monopoly to be both inevitable and bad are inclined toward a policy of ___________ if regulation of the monopoly seems ineffectual.

A laissez-faire policy may be an effective antitrust policy if markets are

Which answer best describes how economists suggest we deal with monopolies and oligopolies?

The reason that antitrust laws exist and are enforced is because most economists and politicians believe that

The Court will block proposed horizontal and vertical mergers when

Economists who favor bigness in firms point to which of the following to support their argument?

Most markets in the U.S. economy are perfectly competitive.

A market cannot be contestable if

Since we live in a world of high concentration ratios,

Which of the following is not consistent with a goal of reducing the power of firms in the market?

Optimal resource allocation is achieved if P = MC.

Some economists reject the idea that bigness is . These people believe our policy should be .

The primary explanation for why a regulatory commission may protect the monopoly it is supposed to regulate is that the commission members

The primary reason government chooses to regulate a natural monopoly is to

Government regulation of industry is designed to separate from.

Which of the following is not an antitrust enforcement option?

When firms already in the industry produce under conditions of substantial economies of scale, entry into the industry is usually more difficult than if the firms produced without those economies of scale.

The theory of creative destruction implies that too much competition leads to monopolies.

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

The effects of airline deregulation in the early to mid-1980s included all of the following except the

Some economists who consider monopoly to be both inevitable and bad are inclined toward a policy of ___________ if regulation of the monopoly seems ineffectual.

A laissez-faire policy may be an effective antitrust policy if markets are

Which answer best describes how economists suggest we deal with monopolies and oligopolies?

The reason that antitrust laws exist and are enforced is because most economists and politicians believe that

The Court will block proposed horizontal and vertical mergers when

Economists who favor bigness in firms point to which of the following to support their argument?

Most markets in the U.S. economy are perfectly competitive.

A market cannot be contestable if

Since we live in a world of high concentration ratios,

Which of the following is not consistent with a goal of reducing the power of firms in the market?

Optimal resource allocation is achieved if P = MC.

Some economists reject the idea that bigness is __________. These people believe our policy should be __________.

The primary explanation for why a regulatory commission may protect the monopoly it is supposed to regulate is that the commission members

The primary reason government chooses to regulate a natural monopoly is to

Government regulation of industry is designed to separate __________ from__________.

Which of the following is not an antitrust enforcement option?

When firms already in the industry produce under conditions of substantial economies of scale, entry into the industry is usually more difficult than if the firms produced without those economies of scale.

The theory of creative destruction implies that too much competition leads to monopolies.

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

Some economists reject the idea that bigness is . These people believe our policy should be .

Government regulation of industry is designed to separate from.