Question 1

Which of the following acts outlawed selling products at "unreasonably low prices" with the intent of reducing competition?

Accepted Answer

A)  Sherman Act 
B)  FTC Act 
C)  Robinson-Patman Act 
D)  Wheeler-Lea Act 
A)  Sherman Act 
B)  FTC Act 
C)  Robinson-Patman Act 
D)  Wheeler-Lea Act

Question 2

According to the capture hypothesis of regulation,

Accepted Answer

A)  regulation favors producers over consumers because the producers were able to pay off the regulators. 
B)  regulation eventually favors producers over consumers because the producers have more at stake than individual consumers. 
C)  regulation benefits the regulators and the legislators who support the regulation by enabling them to obtain favors from both producers and consumers. 
D)  regulation benefits the consumers over producers because the number of consumers is greater than the number of producers, giving the consumers more political clout. 
A)  regulation favors producers over consumers because the producers were able to pay off the regulators. 
B)  regulation eventually favors producers over consumers because the producers have more at stake than individual consumers. 
C)  regulation benefits the regulators and the legislators who support the regulation by enabling them to obtain favors from both producers and consumers. 
D)  regulation benefits the consumers over producers because the number of consumers is greater than the number of producers, giving the consumers more political clout.

Question 3

-Refer to the above figure. What are the price and quantity if this monopolist is required to use average cost pricing?

Accepted Answer

A)    ,   
B)    ,   
C)    ,   
D)    ,   
A)    ,   
B)    ,   
C)    ,   
D)    ,

Question 4

Suppose technical change permits cable television companies to provide their services at lower rates. The share-the-gains, share-the-pains theory would predict that the regulators would

Accepted Answer

A)  permit the firms to keep the savings and would lower prices only if the firms were pressured to do so. 
B)  force the firms to pass all 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 to permit the firms to keep some of the savings themselves. 
A)  permit the firms to keep the savings and would lower prices only if the firms were pressured to do so. 
B)  force the firms to pass all 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 to permit the firms to keep some of the savings themselves.

Question 5

One undesirable effect of social regulation is that it

Accepted Answer

A)  affects smaller firms disproportionately, creating anticompetitive effects. 
B)  destroys incentives for firms to engage in marginal cost pricing. 
C)  raises prices of goods to consumers, while lowering prices to business and special interest groups. 
D)  reduces the effectiveness of economic regulation. 
A)  affects smaller firms disproportionately, creating anticompetitive effects. 
B)  destroys incentives for firms to engage in marginal cost pricing. 
C)  raises prices of goods to consumers, while lowering prices to business and special interest groups. 
D)  reduces the effectiveness of economic regulation.

Question 6

This agency develops and enforces environmental standards for air, water, toxic waste, and noise.

Accepted Answer

A)  Environmental Protection Agency 
B)  Consumer Product Safety Commission 
C)  Equal Employment Opportunity Commission 
D)  Occupational Safety and Health Administration 
A)  Environmental Protection Agency 
B)  Consumer Product Safety Commission 
C)  Equal Employment Opportunity Commission 
D)  Occupational Safety and Health Administration

Question 7

"Today the U.S. telecommunications industry remains heavily regulated by the government as it was some 30 years ago." Do you agree or disagree? Why?

Accepted Answer

Disagree. The telecommunications industr

Question 8

Which of the following is a possible market solution to the lemons problem?

Accepted Answer

A)  Producers might offer product guarantees and warranties. 
B)  Producers might be required to meet certain legal standards to obtain licenses granting the right to sell their products. 
C)  Government agencies might be charged with directly overseeing production and distribution of certain products. 
D)  Liability laws might be established to ensure that firms selling certain products must face penalties in the event the products function poorly. 
A)  Producers might offer product guarantees and warranties. 
B)  Producers might be required to meet certain legal standards to obtain licenses granting the right to sell their products. 
C)  Government agencies might be charged with directly overseeing production and distribution of certain products. 
D)  Liability laws might be established to ensure that firms selling certain products must face penalties in the event the products function poorly.

Question 9

Ajax Corporation has just started advertising that there are 16 ounces in every package. In reality the packages contain only 14 ounces. This misleading advertising

Accepted Answer

A)  is in violation of the Robinson-Patman Act. 
B)  is exempt from the antitrust laws. 
C)  could be subject to an investigation by the Federal Trade Commission. 
D)  could be subject to an investigation by the Sherman Commission. 
A)  is in violation of the Robinson-Patman Act. 
B)  is exempt from the antitrust laws. 
C)  could be subject to an investigation by the Federal Trade Commission. 
D)  could be subject to an investigation by the Sherman Commission.

Question 10

Which of the following protects people from incompetent or unscrupulous producers?

Accepted Answer

A)  The Federal Register 
B)  Social regulation 
C)  The market share test 
D)  Economic regulation 
A)  The Federal Register 
B)  Social regulation 
C)  The market share test 
D)  Economic regulation

Question 11

Which of the following is the BEST example of a natural monopoly?

Accepted Answer

A)  book publisher 
B)  electric utility 
C)  tobacco products company 
D)  airline 
A)  book publisher 
B)  electric utility 
C)  tobacco products company 
D)  airline

Question 12

The first step in enforcing any antitrust policy is to

Accepted Answer

A)  win the support of the public. 
B)  win congressional approval. 
C)  win the approval of the state senators from the state where the company is headquartered. 
D)  define the market. 
A)  win the support of the public. 
B)  win congressional approval. 
C)  win the approval of the state senators from the state where the company is headquartered. 
D)  define the market.

Question 13

Which of the following defines monopolization?

Accepted Answer

A)  The Securities and Exchange Commission 
B)  The Federal Reserve 
C)  U.S. Supreme Court 
D)  Federal Trade Commission Act 
A)  The Securities and Exchange Commission 
B)  The Federal Reserve 
C)  U.S. Supreme Court 
D)  Federal Trade Commission Act

Question 14

One organization in the United States today that is exempt from antitrust laws is

Accepted Answer

A)  the automobile industry. 
B)  professional baseball. 
C)  the oil industry. 
D)  the steel industry. 
A)  the automobile industry. 
B)  professional baseball. 
C)  the oil industry. 
D)  the steel industry.

Question 15

Using the figure as a guide, which of the following is FALSE with respect to profit maximization and the monopolist?

Accepted Answer

A)  A monopolist (like any other firm) will select an output rate at which marginal revenue is equal to marginal cost, at the intersection of the marginal revenue curve and the marginal cost curve. 
B)  The monopolist will produce quantity   and charge a price of   . 
C)  When compared to a competitive situation, consumers pay a higher price to the monopolist, and consequently are forced to purchase more of a product as price varies directly with quantity demanded. 
D)  Profits are the positive difference between total revenues and total costs. 
A)  A monopolist (like any other firm) will select an output rate at which marginal revenue is equal to marginal cost, at the intersection of the marginal revenue curve and the marginal cost curve. 
B)  The monopolist will produce quantity   and charge a price of   . 
C)  When compared to a competitive situation, consumers pay a higher price to the monopolist, and consequently are forced to purchase more of a product as price varies directly with quantity demanded. 
D)  Profits are the positive difference between total revenues and total costs.

Question 16

The FTC is

Accepted Answer

A)  the act that prevents producers from driving out smaller competitors by means of selected discriminatory price cuts. 
B)  the commission that investigates unfair competitive practices such as misleading advertising. 
C)  an agency which has been set up to regulate the federal government. 
D)  the agency set up to regulate hospitals. 
A)  the act that prevents producers from driving out smaller competitors by means of selected discriminatory price cuts. 
B)  the commission that investigates unfair competitive practices such as misleading advertising. 
C)  an agency which has been set up to regulate the federal government. 
D)  the agency set up to regulate hospitals.

Question 17

-Refer to the above figure. From the standpoint of society, the optimal output is

Accepted Answer

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

Question 18

Explain the capture hypothesis.

Accepted Answer

The capture hypothesis is a theory of re

Question 19

Suppose that smart phone producers meet secretly and agree to issue the smart phones of their most successful models sequentially and at the same price that maximizes their profits. After hearing about the secret meeting the U.S. Justice Department is most likely to file charges under the

Accepted Answer

A)  Sherman Act. 
B)  Wheeler-Lea Act. 
C)  Robinson-Patman Act. 
D)  FTC Act. 
A)  Sherman Act. 
B)  Wheeler-Lea Act. 
C)  Robinson-Patman Act. 
D)  FTC Act.

Question 20

Suppose that in an industry, firm X has 50 percent market share, firm Y has 35 percent market share, and firm Z has 10 percent market share. Which of the following mergers is NOT likely to be challenged by the Federal Trade Commission?

Accepted Answer

A)  A merger between firms X and Y 
B)  A merger between firms Y and Z 
C)  A merger between firms X and Z 
D)  Any merger of two firms among those firms is likely to be challenged. 
A)  A merger between firms X and Y 
B)  A merger between firms Y and Z 
C)  A merger between firms X and Z 
D)  Any merger of two firms among those firms is likely to be challenged.

Exam 27: Regulation and Antitrust Policy in a Globalized Economy

Which of the following acts outlawed selling products at "unreasonably low prices" with the intent of reducing competition?

According to the capture hypothesis of regulation,

-Refer to the above figure. What are the price and quantity if this monopolist is required to use average cost pricing?

Suppose technical change permits cable television companies to provide their services at lower rates. The share-the-gains, share-the-pains theory would predict that the regulators would

One undesirable effect of social regulation is that it

This agency develops and enforces environmental standards for air, water, toxic waste, and noise.

"Today the U.S. telecommunications industry remains heavily regulated by the government as it was some 30 years ago." Do you agree or disagree? Why?

Which of the following is a possible market solution to the lemons problem?

Ajax Corporation has just started advertising that there are 16 ounces in every package. In reality the packages contain only 14 ounces. This misleading advertising

Which of the following protects people from incompetent or unscrupulous producers?

Which of the following is the BEST example of a natural monopoly?

The first step in enforcing any antitrust policy is to

Which of the following defines monopolization?

One organization in the United States today that is exempt from antitrust laws is

Using the figure as a guide, which of the following is FALSE with respect to profit maximization and the monopolist?

The FTC is

-Refer to the above figure. From the standpoint of society, the optimal output is

Explain the capture hypothesis.

Suppose that smart phone producers meet secretly and agree to issue the smart phones of their most successful models sequentially and at the same price that maximizes their profits. After hearing about the secret meeting the U.S. Justice Department is most likely to file charges under the

Suppose that in an industry, firm X has 50 percent market share, firm Y has 35 percent market share, and firm Z has 10 percent market share. Which of the following mergers is NOT likely to be challenged by the Federal Trade Commission?

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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