Question 1

Which of the following is an example of an agency concerned with social regulation?

Accepted Answer

A)  Federal Communications Commission 
B)  Securities and Exchange Commission 
C)  Consumer Product Safety Commission 
D)  Federal Energy Regulatory Commission 
A)  Federal Communications Commission 
B)  Securities and Exchange Commission 
C)  Consumer Product Safety Commission 
D)  Federal Energy Regulatory Commission

Question 2

The first antitrust law in the United States was the

Accepted Answer

A)  Glass-Steagall Act. 
B)  Robinson-Patman Act. 
C)  Clayton Act. 
D)  Sherman Act. 
A)  Glass-Steagall Act. 
B)  Robinson-Patman Act. 
C)  Clayton Act. 
D)  Sherman Act.

Question 3

When production is characterized by persistently declining long-run average costs as output increases,

Accepted Answer

A)  the costs of production are greater when competition exists than when a single firm produces a good. 
B)  it is impossible for two firms to compete in the market. 
C)  the costs are lower if a single firm exists, and even if the firm is unregulated, price will still be lower with a single firm. 
D)  there is no need for the government to limit competition by licensing requirements. 
A)  the costs of production are greater when competition exists than when a single firm produces a good. 
B)  it is impossible for two firms to compete in the market. 
C)  the costs are lower if a single firm exists, and even if the firm is unregulated, price will still be lower with a single firm. 
D)  there is no need for the government to limit competition by licensing requirements.

Question 4

The Sudsy Soda Company will not sell its soft drinks to a restaurant unless that business also buys paper cups from Sudsy. This requirement is an example of

Accepted Answer

A)  product versioning. 
B)  tie-in sales. 
C)  price differentiation. 
D)  complementary pricing. 
A)  product versioning. 
B)  tie-in sales. 
C)  price differentiation. 
D)  complementary pricing.

Question 5

According to the text, critics point out that the costs incurred by firms due to regulations

Accepted Answer

A)  increase production costs. 
B)  lower production costs to the shutdown point. 
C)  reduce taxes too far. 
D)  none of the above. 
A)  increase production costs. 
B)  lower production costs to the shutdown point. 
C)  reduce taxes too far. 
D)  none of the above.

Question 6

-In the above figure, a regulation requiring average cost pricing would force the firm to produce at output level

Accepted Answer

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

Question 7

All of the following are regulatory agencies EXCEPT

Accepted Answer

A)  the National Rifle Association. 
B)  the Environmental Protection Agency. 
C)  the Food and Drug Administration. 
D)  the Occupational Safety and Health Administration. 
A)  the National Rifle Association. 
B)  the Environmental Protection Agency. 
C)  the Food and Drug Administration. 
D)  the Occupational Safety and Health Administration.

Question 8

Cost-of-service regulation allows regulated companies to charge prices that

Accepted Answer

A)  reflect the cost of regulating the industry, plus the marginal cost of the product. 
B)  allow monopoly profits to the producer. 
C)  reflect the actual average cost of providing the services to the customer. 
D)  are determined by competition in other geographic markets. 
A)  reflect the cost of regulating the industry, plus the marginal cost of the product. 
B)  allow monopoly profits to the producer. 
C)  reflect the actual average cost of providing the services to the customer. 
D)  are determined by competition in other geographic markets.

Question 9

The 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)  are more than covered by the benefits gained from the regulation. 
D)  are relatively small. 
A)  include increased taxes and increased prices of the products being regulated. 
B)  are paid entirely by the regulated industries. 
C)  are more than covered by the benefits gained from the regulation. 
D)  are relatively small.

Question 10

In a natural monopoly situation,

Accepted Answer

A)  there are large economies of scale relative to demand. 
B)  the firm has an upward sloping average cost curve. 
C)  producers try to differentiate their product with advertising. 
D)  there is no need for government regulation. 
A)  there are large economies of scale relative to demand. 
B)  the firm has an upward sloping average cost curve. 
C)  producers try to differentiate their product with advertising. 
D)  there is no need for government regulation.

Question 11

Which of the following is NOT a reason for the government to regulate a nonmonopolistic industry?

Accepted Answer

A)  To allow firms to achieve the profit maximizing output. 
B)  Asymmetric information. 
C)  To protect consumer interests. 
D)  Market failures. 
A)  To allow firms to achieve the profit maximizing output. 
B)  Asymmetric information. 
C)  To protect consumer interests. 
D)  Market failures.

Question 12

-In the above figure, if this natural monopolist were unregulated, the profit maximizing firm would sell the product at the price ________.

Accepted Answer

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

Question 13

-Use the above figure. If a commission regulates the above monopoly using fair-return (average 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 14

The Federal Trade Commission regulates which of the following?

Accepted Answer

A)  Unfair trade practices by businesses 
B)  Financial markets 
C)  Trade with third world countries 
D)  The banking industry 
A)  Unfair trade practices by businesses 
B)  Financial markets 
C)  Trade with third world countries 
D)  The banking industry

Question 15

Section 1 of the Sherman Antitrust Act makes it illegal to

Accepted Answer

A)  form a monopolistically competitive firm. 
B)  restrain trade. 
C)  price discriminate. 
D)  have an oligopoly. 
A)  form a monopolistically competitive firm. 
B)  restrain trade. 
C)  price discriminate. 
D)  have an oligopoly.

Question 16

-Use the above figure. A regulatory commission sets the maximum price this monopolist can charge at P1. If this monopolist were to produce, it

Accepted Answer

A)  would produce   output and generate losses. 
B)  would produce   output and generate profits. 
C)  would produce   output and generate losses. 
D)  would produce   output and generate profits. 
A)  would produce   output and generate losses. 
B)  would produce   output and generate profits. 
C)  would produce   output and generate losses. 
D)  would produce   output and generate profits.

Question 17

Antitrust laws in the United States

Accepted Answer

A)  are an attempt to foster competition. 
B)  are not necessary in the twenty-first century. 
C)  have not been used in the past twenty-five years. 
D)  are the same as the laws in the European Union. 
A)  are an attempt to foster competition. 
B)  are not necessary in the twenty-first century. 
C)  have not been used in the past twenty-five years. 
D)  are the same as the laws in the European Union.

Question 18

A retail store cuts the prices of the products it sells to force its competitor to leave the market. This is prohibited by the

Accepted Answer

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

Question 19

All of the following are exempt from antitrust lawsuits EXCEPT

Accepted Answer

A)  labor unions. 
B)  professional baseball. 
C)  public transportation. 
D)  software developers. 
A)  labor unions. 
B)  professional baseball. 
C)  public transportation. 
D)  software developers.

Question 20

Regarding the costs of regulation, which is a FALSE statement?

Accepted Answer

A)  Airline safety standards have increased the price of air travel. 
B)  Automobile safety standards raise the price of cars. 
C)  Regulatory spending by federal agencies has decreased since 1970. 
D)  Pharmaceutical manufacturing safety standards raise the price of drugs. 
A)  Airline safety standards have increased the price of air travel. 
B)  Automobile safety standards raise the price of cars. 
C)  Regulatory spending by federal agencies has decreased since 1970. 
D)  Pharmaceutical manufacturing safety standards raise the price of drugs.

Exam 27: Regulation and Antitrust Policy in a Globalized Economy

Which of the following is an example of an agency concerned with social regulation?

The first antitrust law in the United States was the

When production is characterized by persistently declining long-run average costs as output increases,

The Sudsy Soda Company will not sell its soft drinks to a restaurant unless that business also buys paper cups from Sudsy. This requirement is an example of

According to the text, critics point out that the costs incurred by firms due to regulations

-In the above figure, a regulation requiring average cost pricing would force the firm to produce at output level

All of the following are regulatory agencies EXCEPT

Cost-of-service regulation allows regulated companies to charge prices that

The costs of regulation

In a natural monopoly situation,

Which of the following is NOT a reason for the government to regulate a nonmonopolistic industry?

-In the above figure, if this natural monopolist were unregulated, the profit maximizing firm would sell the product at the price ________.

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

The Federal Trade Commission regulates which of the following?

Section 1 of the Sherman Antitrust Act makes it illegal to

-Use the above figure. A regulatory commission sets the maximum price this monopolist can charge at P1. If this monopolist were to produce, it

Antitrust laws in the United States

A retail store cuts the prices of the products it sells to force its competitor to leave the market. This is prohibited by the

All of the following are exempt from antitrust lawsuits EXCEPT

Regarding the costs of regulation, which is a FALSE statement?

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 fair-return (average cost pricing), then the industry's output will be and the product's price will be .

-Use the above figure. A regulatory commission sets the maximum price this monopolist can charge at P₁. If this monopolist were to produce, it