Question 1

All of the following are possible criticisms of social regulation EXCEPT

Accepted Answer

A)  that the costs may outweigh the benefits. 
B)  that social regulation may create anticompetitive effects. 
C)  that the regulations have not resulted in safer working conditions. 
D)  that the regulations lead to higher production costs. 
A)  that the costs may outweigh the benefits. 
B)  that social regulation may create anticompetitive effects. 
C)  that the regulations have not resulted in safer working conditions. 
D)  that the regulations lead to higher production costs.

Question 2

The problem of asymmetric information that brings about a general decline in product quality in an industry is

Accepted Answer

A)  a market failure. 
B)  the result of government regulation. 
C)  creative response. 
D)  the lemons problem. 
A)  a market failure. 
B)  the result of government regulation. 
C)  creative response. 
D)  the lemons problem.

Question 3

When a regulator allows a monopolist to set its price equal to long-run average cost, the regulator is practicing

Accepted Answer

A)  marginal cost pricing. 
B)  operating cost pricing. 
C)  average cost pricing. 
D)  optimal cost pricing. 
A)  marginal cost pricing. 
B)  operating cost pricing. 
C)  average cost pricing. 
D)  optimal cost pricing.

Question 4

Which type of regulation applies to all firms in the economy, as opposed to only covering specific industries?

Accepted Answer

A)  Economic regulation 
B)  Social regulation 
C)  Rate regulation 
D)  Statutory regulation 
A)  Economic regulation 
B)  Social regulation 
C)  Rate regulation 
D)  Statutory regulation

Question 5

The Federal Trade Commission (FTC) is a regulatory agency that is responsible for preventing firms from engaging in misleading advertising. This type of regulation is known as

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 6

Behavior on the part of the firm that allows it to comply with the letter of the law but violate the spirit reducing the law's effect is

Accepted Answer

A)  asymmetric information. 
B)  creative response. 
C)  the lemons problem. 
D)  only a problem in a monopoly. 
A)  asymmetric information. 
B)  creative response. 
C)  the lemons problem. 
D)  only a problem in a monopoly.

Question 7

In a court decision in June 2001, the Federal District Count of Appeals in Washington, D.C. found that Microsoft had violated the

Accepted Answer

A)  Clayton Act. 
B)  Robinson-Patman Act. 
C)  Sherman Act. 
D)  Celler-Kefauver Act. 
A)  Clayton Act. 
B)  Robinson-Patman Act. 
C)  Sherman Act. 
D)  Celler-Kefauver Act.

Question 8

The theory that regulators' behavior will eventually be compromised by the special interests they regulate is known as the

Accepted Answer

A)  capitulation hypothesis. 
B)  creative hypothesis. 
C)  captive hypothesis. 
D)  capture hypothesis. 
A)  capitulation hypothesis. 
B)  creative hypothesis. 
C)  captive hypothesis. 
D)  capture hypothesis.

Question 9

When consumers have less information about a product than do sellers, then this is the situation of

Accepted Answer

A)  asymmetric information. 
B)  symmetric information. 
C)  caveat emptor. 
D)  a market failure. 
A)  asymmetric information. 
B)  symmetric information. 
C)  caveat emptor. 
D)  a market failure.

Question 10

A possible market solution that a reputable firm can engage in when faced with the lemons problem is

Accepted Answer

A)  to offer a warranty. 
B)  to engage in externalities. 
C)  to create asymmetric information. 
D)  to use average cost pricing. 
A)  to offer a warranty. 
B)  to engage in externalities. 
C)  to create asymmetric information. 
D)  to use average cost pricing.

Question 11

U.S. securities firms recently agreed to pay a record amount of $1.4 billion in settlement charges brought by government regulators. Regulators claimed that firms had abused investors during the market boom of the 1990s. Abuses included analysts tailoring their research reports and ratings on the stocks they covered in order to win more business for their firm. If this settlement causes Wall Street firms to comply with the letter of the law but they violate the spirit of the law, the firms are engaging in

Accepted Answer

A)  elimination of conflicts of interest. 
B)  creative response. 
C)  the capture hypothesis. 
D)  deregulation. 
A)  elimination of conflicts of interest. 
B)  creative response. 
C)  the capture hypothesis. 
D)  deregulation.

Question 12

Cost-of-service-regulation sets prices by considering

Accepted Answer

A)  the actual variable cost of providing the service to the customer. 
B)  the actual total cost of providing the service to the customer. 
C)  the actual average cost of providing the service to the customer. 
D)  the actual marginal cost of providing the service to the customer. 
A)  the actual variable cost of providing the service to the customer. 
B)  the actual total cost of providing the service to the customer. 
C)  the actual average cost of providing the service to the customer. 
D)  the actual marginal cost of providing the service to the customer.

Question 13

The capture hypothesis suggests that

Accepted Answer

A)  marginal cost regulation is superior to average cost regulation. 
B)  the well-focused interests of consumers will lead to the over-regulation of most industries. 
C)  the firms being regulated will unduly influence the regulators. 
D)  regulation will lead to over-entry and eventual losses for firms in the industry. 
A)  marginal cost regulation is superior to average cost regulation. 
B)  the well-focused interests of consumers will lead to the over-regulation of most industries. 
C)  the firms being regulated will unduly influence the regulators. 
D)  regulation will lead to over-entry and eventual losses for firms in the industry.

Question 14

If regulators force a natural monopoly to price as a perfectly competitive firm would, the natural monopolist

Accepted Answer

A)  will earn higher economic profits. 
B)  will earn an economic loss. 
C)  will expand its output. 
D)  will experience a rise in long-term average costs. 
A)  will earn higher economic profits. 
B)  will earn an economic loss. 
C)  will expand its output. 
D)  will experience a rise in long-term average costs.

Question 15

If bottled water, soft drinks and juices are included in the definition of the beverage market, then the relevant definition of the market is defined by

Accepted Answer

A)  the locations of products that are produced. 
B)  the low degrees of substitution between products in the market. 
C)  the high degrees of substitution between products in the market. 
D)  a low level of competition among firms producing those products. 
A)  the locations of products that are produced. 
B)  the low degrees of substitution between products in the market. 
C)  the high degrees of substitution between products in the market. 
D)  a low level of competition among firms producing those products.

Question 16

The Sherman Act

Accepted Answer

A)  prohibited banks from crossing states lines. 
B)  prohibited railroads from transporting explosives. 
C)  provided for the regulation of natural monopolies. 
D)  declared that monopolization and restraint of trade were illegal. 
A)  prohibited banks from crossing states lines. 
B)  prohibited railroads from transporting explosives. 
C)  provided for the regulation of natural monopolies. 
D)  declared that monopolization and restraint of trade were illegal.

Question 17

-In the above figure, what will be the output level produced if average cost pricing is used?

Accepted Answer

A)  1,200 
B)  900 
C)  700 
D)  somewhere between 900 and 1,200 
A)  1,200 
B)  900 
C)  700 
D)  somewhere between 900 and 1,200

Question 18

Which of the following federal agencies is engaged in economic regulation?

Accepted Answer

A)  Occupational Safety and Health Administration 
B)  Federal Motor Carrier Safety Administration 
C)  Food and Drug Administration 
D)  Consumer Product Safety Commission 
A)  Occupational Safety and Health Administration 
B)  Federal Motor Carrier Safety Administration 
C)  Food and Drug Administration 
D)  Consumer Product Safety Commission

Question 19

While economic regulation applies to ________ industries, social regulation applies to ________ firms.

Accepted Answer

A)  particular; individual 
B)  particular; all 
C)  all; individual 
D)  utility; healthcare 
A)  particular; individual 
B)  particular; all 
C)  all; individual 
D)  utility; healthcare

Question 20

Which of the following is NOT exempt from antitrust laws?

Accepted Answer

A)  Professional baseball 
B)  Labor unions 
C)  Airlines 
D)  Public transit systems 
A)  Professional baseball 
B)  Labor unions 
C)  Airlines 
D)  Public transit systems

Exam 27: Regulation and Antitrust Policy in a Globalized Economy

All of the following are possible criticisms of social regulation EXCEPT

The problem of asymmetric information that brings about a general decline in product quality in an industry is

When a regulator allows a monopolist to set its price equal to long-run average cost, the regulator is practicing

Which type of regulation applies to all firms in the economy, as opposed to only covering specific industries?

The Federal Trade Commission (FTC) is a regulatory agency that is responsible for preventing firms from engaging in misleading advertising. This type of regulation is known as

Behavior on the part of the firm that allows it to comply with the letter of the law but violate the spirit reducing the law's effect is

In a court decision in June 2001, the Federal District Count of Appeals in Washington, D.C. found that Microsoft had violated the

The theory that regulators' behavior will eventually be compromised by the special interests they regulate is known as the

When consumers have less information about a product than do sellers, then this is the situation of

A possible market solution that a reputable firm can engage in when faced with the lemons problem is

Cost-of-service-regulation sets prices by considering

The capture hypothesis suggests that

If regulators force a natural monopoly to price as a perfectly competitive firm would, the natural monopolist

If bottled water, soft drinks and juices are included in the definition of the beverage market, then the relevant definition of the market is defined by

The Sherman Act

-In the above figure, what will be the output level produced if average cost pricing is used?

Which of the following federal agencies is engaged in economic regulation?

While economic regulation applies to ________ industries, social regulation applies to ________ firms.

Which of the following is NOT exempt from antitrust laws?

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

While economic regulation applies to industries, social regulation applies to firms.