Question 1

The agency that deals with issues of "unfair and deceptive acts or practices in commerce" is the

Accepted Answer

A)  Federal Trade Commission. 
B)  Federal Products Commission. 
C)  Federal Consumer Protection Agency. 
D)  Federal Advertising Commission. 
A)  Federal Trade Commission. 
B)  Federal Products Commission. 
C)  Federal Consumer Protection Agency. 
D)  Federal Advertising Commission.

Question 2

-In the above figure, if this natural monopolist were forced to use marginal cost pricing, it would sell the product at the price ________.

Accepted Answer

A)  A 
B)  C 
C)  E 
D)  F 
A)  A 
B)  C 
C)  E 
D)  F

Question 3

-In the above figure, if this natural monopolist were regulated and allowed to earn a "fair" rate of return, it would produce

Accepted Answer

A)  at Q1 output rate. 
B)  at Q2 output rate. 
C)  at Q3 output rate. 
D)  past the Q3 output rate. 
A)  at Q1 output rate. 
B)  at Q2 output rate. 
C)  at Q3 output rate. 
D)  past the Q3 output rate.

Question 4

Explain the share-the-gains, share-the-pains theory. How does it differ from the capture hypothesis?

Accepted Answer

The share-the-gains, share-the-pains the

Question 5

The main rationale for government regulatory functions is

Accepted Answer

A)  to regulate for-profit institutions. 
B)  to make sure that firms are maximizing profits. 
C)  to expand the scope of the government. 
D)  to protect consumer interests. 
A)  to regulate for-profit institutions. 
B)  to make sure that firms are maximizing profits. 
C)  to expand the scope of the government. 
D)  to protect consumer interests.

Question 6

Which of the following is NOT an antitrust law?

Accepted Answer

A)  The Robinson-Patman Act 
B)  The Smoot-Hawley Act 
C)  The FTC Act 
D)  The Sherman Act 
A)  The Robinson-Patman Act 
B)  The Smoot-Hawley Act 
C)  The FTC Act 
D)  The Sherman Act

Question 7

The act of offering two or more products for sale as a set is called

Accepted Answer

A)  bundling. 
B)  versioning. 
C)  tie-in sales. 
D)  branding. 
A)  bundling. 
B)  versioning. 
C)  tie-in sales. 
D)  branding.

Question 8

Which of the following best describes the difference between cost-of-service regulation and rate-of-return regulation?

Accepted Answer

A)  Costs determine prices in cost-of-service regulation and prices determine costs in rate-of-return regulation. 
B)  Costs determine prices in cost-of-service regulation and prices are set in rate-of-return regulation so the firm can make a normal rate of return. 
C)  Variable costs determine prices in cost-of-service regulation and prices are set in rate-of-return regulation so the firm can make an economic profit. 
D)  Regulators determine prices in cost-of-service regulation and market forces determine prices in rate-of-return regulation. 
A)  Costs determine prices in cost-of-service regulation and prices determine costs in rate-of-return regulation. 
B)  Costs determine prices in cost-of-service regulation and prices are set in rate-of-return regulation so the firm can make a normal rate of return. 
C)  Variable costs determine prices in cost-of-service regulation and prices are set in rate-of-return regulation so the firm can make an economic profit. 
D)  Regulators determine prices in cost-of-service regulation and market forces determine prices in rate-of-return regulation.

Question 9

Which of the following is most subject to the lemons problem?

Accepted Answer

A)  credence goods 
B)  homogeneous goods 
C)  search goods 
D)  inferior goods 
A)  credence goods 
B)  homogeneous goods 
C)  search goods 
D)  inferior goods

Question 10

If a regulator forced a natural monopolist to set P = MC,

Accepted Answer

A)  the monopolist would earn economic profits. 
B)  the monopolist would suffer economic losses. 
C)  the monopolist would break even. 
D)  the monopolist would earn monopolistic profits. 
A)  the monopolist would earn economic profits. 
B)  the monopolist would suffer economic losses. 
C)  the monopolist would break even. 
D)  the monopolist would earn monopolistic profits.

Question 11

Which of the following is exempt from antitrust laws?

Accepted Answer

A)  Professional football 
B)  Petroleum companies 
C)  Airlines 
D)  Hospitals 
A)  Professional football 
B)  Petroleum companies 
C)  Airlines 
D)  Hospitals

Question 12

Discuss the important provisions of the Sherman Antitrust Act of 1890.

Accepted Answer

The Sherman Antitrust Act prohibits cont

Question 13

The two basic types of government regulation are

Accepted Answer

A)  regulation of natural monopolies and regulation of cartels. 
B)  economic regulation and industry regulation. 
C)  social regulation and labor law. 
D)  social regulation and economic regulation. 
A)  regulation of natural monopolies and regulation of cartels. 
B)  economic regulation and industry regulation. 
C)  social regulation and labor law. 
D)  social regulation and economic regulation.

Question 14

A natural monopoly owes its existence to

Accepted Answer

A)  control of a key input. 
B)  persistently declining long-run average costs as scale increases. 
C)  patents. 
D)  increasing marginal returns and the ability to obtain quantity discounts from suppliers. 
A)  control of a key input. 
B)  persistently declining long-run average costs as scale increases. 
C)  patents. 
D)  increasing marginal returns and the ability to obtain quantity discounts from suppliers.

Question 15

When the fox is guarding the henhouse, that is an example of the

Accepted Answer

A)  share-the-gains, share-the-pains theory. 
B)  regulatory hypothesis. 
C)  capture hypothesis. 
D)  creative theory. 
A)  share-the-gains, share-the-pains theory. 
B)  regulatory hypothesis. 
C)  capture hypothesis. 
D)  creative theory.

Question 16

-In the above figure, what would be the profit or loss at the profit-maximizing output 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 17

The total costs of regulation

Accepted Answer

A)  include increased taxes and increased prices of the products being regulated. 
B)  are paid entirely by the regulated industries. 
C)  much higher than just the explicit government outlays to fund the administration of various regulations. 
D)  are paid entirely by the consumers of regulated industries. 
A)  include increased taxes and increased prices of the products being regulated. 
B)  are paid entirely by the regulated industries. 
C)  much higher than just the explicit government outlays to fund the administration of various regulations. 
D)  are paid entirely by the consumers of regulated industries.

Question 18

Suppose that a regulated industry experiences an increase in the price of inputs used to produce the good. According to the share-the-gains, share-the-pain theory, we would expect

Accepted Answer

A)  prices to increase by a little immediately and profits to decrease by a lot. 
B)  there will be some increase in price but not immediately. 
C)  no increase in price. 
D)  a quick increase in price maintains profits in the industry. 
A)  prices to increase by a little immediately and profits to decrease by a lot. 
B)  there will be some increase in price but not immediately. 
C)  no increase in price. 
D)  a quick increase in price maintains profits in the industry.

Question 19

Regulation that is based upon the cost of providing the good or service is known as

Accepted Answer

A)  rate-of-return regulation. 
B)  cost-of-service regulation. 
C)  social regulation. 
D)  deregulation. 
A)  rate-of-return regulation. 
B)  cost-of-service regulation. 
C)  social regulation. 
D)  deregulation.

Question 20

A regulated natural monopolist allowed to earn a "fair" rate of return would produce to the point at which

Accepted Answer

A)  P = LAC. 
B)  MR = LAC. 
C)  MR = MC. 
D)  P = MR. 
A)  P = LAC. 
B)  MR = LAC. 
C)  MR = MC. 
D)  P = MR.

Exam 27: Regulation and Antitrust Policy in a Globalized Economy

The agency that deals with issues of "unfair and deceptive acts or practices in commerce" is the

-In the above figure, if this natural monopolist were forced to use marginal cost pricing, it would sell the product at the price ________.

-In the above figure, if this natural monopolist were regulated and allowed to earn a "fair" rate of return, it would produce

Explain the share-the-gains, share-the-pains theory. How does it differ from the capture hypothesis?

The main rationale for government regulatory functions is

Which of the following is NOT an antitrust law?

The act of offering two or more products for sale as a set is called

Which of the following best describes the difference between cost-of-service regulation and rate-of-return regulation?

Which of the following is most subject to the lemons problem?

If a regulator forced a natural monopolist to set P = MC,

Which of the following is exempt from antitrust laws?

Discuss the important provisions of the Sherman Antitrust Act of 1890.

The two basic types of government regulation are

A natural monopoly owes its existence to

When the fox is guarding the henhouse, that is an example of the

-In the above figure, what would be the profit or loss at the profit-maximizing output for this natural monopolist?

The total costs of regulation

Suppose that a regulated industry experiences an increase in the price of inputs used to produce the good. According to the share-the-gains, share-the-pain theory, we would expect

Regulation that is based upon the cost of providing the good or service is known as

A regulated natural monopolist allowed to earn a "fair" rate of return would produce to the point at which

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

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