Question 1

An unregulated natural monopolist will produce the quantity at which

Accepted Answer

A)  average total costs are minimized. 
B)  marginal cost equals marginal revenue. 
C)  marginal cost equals the long run average cost curve. 
D)  the long-run average cost curve intersects the demand curve. 
A)  average total costs are minimized. 
B)  marginal cost equals marginal revenue. 
C)  marginal cost equals the long run average cost curve. 
D)  the long-run average cost curve intersects the demand curve. B

Question 2

If regulators disallow price increases requested by a natural monopoly that is currently earning an economic loss, quality of service will

Accepted Answer

A)  increase rapidly. 
B)  likely fall. 
C)  remain unchanged. 
D)  none of the above. 
A)  increase rapidly. 
B)  likely fall. 
C)  remain unchanged. 
D)  none of the above. B

Question 3

The price charged by a monopolist is socially inefficient because the price

Accepted Answer

A)  exceeds the true marginal cost of the resources used. 
B)  is less than the opportunity cost of the resources used. 
C)  puts the monopolist into a higher tax bracket. 
D)  is too low. 
A)  exceeds the true marginal cost of the resources used. 
B)  is less than the opportunity cost of the resources used. 
C)  puts the monopolist into a higher tax bracket. 
D)  is too low. A

Question 4

Suppose technical change makes it cheaper for cable television suppliers to supply their service. The capture theory would predict that the regulators would

Accepted Answer

A)  allow the firms to capture the savings and would lower price only if the firms asked them to. 
B)  force the firms to pass the savings on to consumers in the form of lower prices. 
C)  force the firms to pass the savings on to consumers in the form of better service. 
D)  force the firms to pass some of the savings on to consumers and permit them to keep some of the savings for themselves. 
A)  allow the firms to capture the savings and would lower price only if the firms asked them to. 
B)  force the firms to pass the savings on to consumers in the form of lower prices. 
C)  force the firms to pass the savings on to consumers in the form of better service. 
D)  force the firms to pass some of the savings on to consumers and permit them to keep some of the savings for themselves.

Question 5

If antitrust legislation is successful, then the monopolistic firm will

Accepted Answer

A)  decrease output and charge a lower price than before. 
B)  increase output and charge a higher price than before. 
C)  increase output and charge a lower price than before. 
D)  decrease output and charge a higher price than before. 
A)  decrease output and charge a lower price than before. 
B)  increase output and charge a higher price than before. 
C)  increase output and charge a lower price than before. 
D)  decrease output and charge a higher price than before.

Question 6

-In the above figure, an unregulated natural monopolist will produce output level

Accepted Answer

A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Q4. 
A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Q4.

Question 7

Credence goods are particularly susceptible to the lemons problem because

Accepted Answer

A)  they have qualities that are difficult for producers to fully assess. 
B)  they have qualities that are difficult for consumers to fully assess. 
C)  creative responses among producers create volatility in market supply. 
D)  creative responses among consumers create volatility in market demand. 
A)  they have qualities that are difficult for producers to fully assess. 
B)  they have qualities that are difficult for consumers to fully assess. 
C)  creative responses among producers create volatility in market supply. 
D)  creative responses among consumers create volatility in market demand.

Question 8

-Use the above figure. Suppose that a regulatory agency requires this natural monopolist to engage in marginal cost pricing. This would lead to

Accepted Answer

A)  losses, which would drive the monopolist out of business in the long run. 
B)  profits, which would encourage new producers to enter the industry in the long run. 
C)  profits, but new firms cannot enter the industry in the long run due to high barriers to entry. 
D)  losses, which would encourage the monopolist to lower costs in the long run. 
A)  losses, which would drive the monopolist out of business in the long run. 
B)  profits, which would encourage new producers to enter the industry in the long run. 
C)  profits, but new firms cannot enter the industry in the long run due to high barriers to entry. 
D)  losses, which would encourage the monopolist to lower costs in the long run.

Question 9

One weakness of the Sherman Act is that

Accepted Answer

A)  it fails to clearly define restraint of trade. 
B)  it applies only to foreign monopolies. 
C)  it applies only to the steel and railroad industries. 
D)  none of the above 
A)  it fails to clearly define restraint of trade. 
B)  it applies only to foreign monopolies. 
C)  it applies only to the steel and railroad industries. 
D)  none of the above

Question 10

-Use the above figure. If a commission regulates the above monopoly using marginal cost pricing, then the industry's output will be ________ and the product's price will be ________.

Accepted Answer

A)    ;   
B)    ;   
C)    ;   
D)    ;   
A)    ;   
B)    ;   
C)    ;   
D)    ;

Question 11

-Refer to the above figure. Suppose the government requires the natural monopolist to charge the efficient price. Then profits for the firm will be

Accepted Answer

A)  zero. 
B)  losses equal to   times distance f-g. 
C)  losses equal to   times distance d-e. 
D)  profits equal to   times distance a-b. 
A)  zero. 
B)  losses equal to   times distance f-g. 
C)  losses equal to   times distance d-e. 
D)  profits equal to   times distance a-b.

Question 12

The "capture" in the capture hypothesis occurs because

Accepted Answer

A)  regulators try to promote everyone's best interest. 
B)  society doesn't care for regulatory agencies. 
C)  regulators always know what is in society's best interest. 
D)  regulators usually have been or will be associated with the industries they regulate. 
A)  regulators try to promote everyone's best interest. 
B)  society doesn't care for regulatory agencies. 
C)  regulators always know what is in society's best interest. 
D)  regulators usually have been or will be associated with the industries they regulate.

Question 13

The key issue in determining the relevant product market is

Accepted Answer

A)  the degree of interchangeability between products. 
B)  the specific geographic area in which competing products overlap. 
C)  the production processes used to produce the goods. 
D)  the market share test. 
A)  the degree of interchangeability between products. 
B)  the specific geographic area in which competing products overlap. 
C)  the production processes used to produce the goods. 
D)  the market share test.

Question 14

The Sherman Antitrust Act was passed to

Accepted Answer

A)  protect companies from foreign competition. 
B)  protect the monopoly profits of firms. 
C)  control the growth of monopolies in the U.S. 
D)  prevent market price from equaling marginal cost. 
A)  protect companies from foreign competition. 
B)  protect the monopoly profits of firms. 
C)  control the growth of monopolies in the U.S. 
D)  prevent market price from equaling marginal cost.

Question 15

-In the above figure, what would be the profit or loss at the marginal cost pricing point for this natural monopolist?

Accepted Answer

A)  -$300 
B)  $2,700 
C)  $2,100 
D)  -$1,200 
A)  -$300 
B)  $2,700 
C)  $2,100 
D)  -$1,200

Question 16

U.S. government regulation of social and economic activity

Accepted Answer

A)  only began after World War II. 
B)  costs less now than it did in the 1980s. 
C)  has increased steadily since 1970. 
D)  is confined to antitrust law. 
A)  only began after World War II. 
B)  costs less now than it did in the 1980s. 
C)  has increased steadily since 1970. 
D)  is confined to antitrust law.

Question 17

What is the lemons problem? How do firms try to address this problem?

Accepted Answer

The lemons problem occurs when asymmetri

Question 18

The Federal Trade Commission was established in 1914 to

Accepted Answer

A)  regulate trade of public goods. 
B)  promote competition in interstate commerce. 
C)  investigate unfair competitive practices. 
D)  prevent non-price competition. 
A)  regulate trade of public goods. 
B)  promote competition in interstate commerce. 
C)  investigate unfair competitive practices. 
D)  prevent non-price competition.

Question 19

Offering two or more products for sale as a set is known as

Accepted Answer

A)  bundling. 
B)  versioning. 
C)  monopolizing. 
D)  product sharing. 
A)  bundling. 
B)  versioning. 
C)  monopolizing. 
D)  product sharing.

Question 20

The following table depicts the cost and demand structure a natural monopoly faces. Provided that the firm operates as a monopolist, what is the price charged and quantity produced in order to maximize profits?

Accepted Answer

A)  price charged of $900 and quantity produced of 1 
B)  price charged of $800 and quantity produced of 2 
C)  price charged of $700 and quantity produced of 3 
D)  price charged of $600 and quantity produced of 4 
A)  price charged of $900 and quantity produced of 1 
B)  price charged of $800 and quantity produced of 2 
C)  price charged of $700 and quantity produced of 3 
D)  price charged of $600 and quantity produced of 4

Exam 27: Regulation and Antitrust Policy in a Globalized Economy

An unregulated natural monopolist will produce the quantity at which

If regulators disallow price increases requested by a natural monopoly that is currently earning an economic loss, quality of service will

The price charged by a monopolist is socially inefficient because the price

Suppose technical change makes it cheaper for cable television suppliers to supply their service. The capture theory would predict that the regulators would

If antitrust legislation is successful, then the monopolistic firm will

-In the above figure, an unregulated natural monopolist will produce output level

Credence goods are particularly susceptible to the lemons problem because

-Use the above figure. Suppose that a regulatory agency requires this natural monopolist to engage in marginal cost pricing. This would lead to

One weakness of the Sherman Act is that

-Use the above figure. If a commission regulates the above monopoly using marginal cost pricing, then the industry's output will be ________ and the product's price will be ________.

-Refer to the above figure. Suppose the government requires the natural monopolist to charge the efficient price. Then profits for the firm will be

The "capture" in the capture hypothesis occurs because

The key issue in determining the relevant product market is

The Sherman Antitrust Act was passed to

-In the above figure, what would be the profit or loss at the marginal cost pricing point for this natural monopolist?

U.S. government regulation of social and economic activity

What is the lemons problem? How do firms try to address this problem?

The Federal Trade Commission was established in 1914 to

Offering two or more products for sale as a set is known as

The following table depicts the cost and demand structure a natural monopoly faces. Provided that the firm operates as a monopolist, what is the price charged and quantity produced in order to maximize profits?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

-Use the above figure. If a commission regulates the above monopoly using marginal cost pricing, then the industry's output will be and the product's price will be .