Question 1

If all large firms in the economy were broken into smaller firms,the result might be

Accepted Answer

A) decreased manufacturing efficiency in some industries. 
B) increased prices for some manufactured goods. 
C) decreased investment in research and development in some industries. 
D) All of the above are correct. 
A) decreased manufacturing efficiency in some industries. 
B) increased prices for some manufactured goods. 
C) decreased investment in research and development in some industries. 
D) All of the above are correct. D

Question 2

Regulating firms so that they always receive a guaranteed profit rate will lead to greatest efficiency.

Accepted Answer

A) True 
 B)False  False

Question 3

On balance,does market power promote or retard technological innovation?

Accepted Answer

The evidence is not clear-cut.While small competitive firms have great incentive to innovate to gain a competitive edge over rivals,larger firms have greater resources to devote to research.
On the question of firm size and R & D spending,there is evidence that competitive industries with very small firms devote fewer resources to R & D.Up to a point,R & D rises and rates of innovation rise with firm size.However,some of the most significant innovations in the twentieth century have been introduced by small firms.Examples include electric lighting,photocopiers,and electronic calculators.It should be noted,though,that large firms are often superior marketers of technological innovations where small firms are not.

Question 4

From an efficiency standpoint,should the courts prosecute all suspected antitrust violations?

Accepted Answer

Antitrust cases use up a lot of resource

Question 5

If a firm is a natural monopoly,society will benefit if it is broken into several small companies.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following acts prohibited false advertising?

Accepted Answer

A) Sherman Act 
B) Clayton Act 
C) Federal Trade Commission Act 
D) Celler-Kefauver Act 
A) Sherman Act 
B) Clayton Act 
C) Federal Trade Commission Act 
D) Celler-Kefauver Act

Question 7

Some critics of antitrust are worried that some firms

Accepted Answer

A) will seek to increase competition to a dangerous level. 
B) will collude in order to avoid the laws. 
C) may use antitrust to prevent competition. 
D) may go out of business from large damage awards. 
A) will seek to increase competition to a dangerous level. 
B) will collude in order to avoid the laws. 
C) may use antitrust to prevent competition. 
D) may go out of business from large damage awards.

Question 8

Firms with monopoly power tend to be more efficient than competitive firms.

Accepted Answer

A) True 
 B)False

Question 9

Deregulation of the airline and trucking industry has (i)resulted in considerable entry of new firms,and (ii)has forced unions in these industries to make large concessions on wages and working conditions.

Accepted Answer

A) i and ii 
B) i but not ii 
C) ii but not i 
D) neither i nor ii 
A) i and ii 
B) i but not ii 
C) ii but not i 
D) neither i nor ii

Question 10

Deregulation has led to higher prices.

Accepted Answer

A) True 
 B)False

Question 11

Discuss some of the reasons why monopoly power is considered undesirable.

Accepted Answer

Some of the reasons are:
1.Hig

Question 12

The prices that are in the public's best interest will

Accepted Answer

A) always allow the regulated firm to break even. 
B) always allow the regulated firm to make positive economic profits. 
C) sometimes leave the regulated firm with economic losses. 
D) leave the regulated firm with profits that are about 10 percent higher than those of other firms. 
A) always allow the regulated firm to break even. 
B) always allow the regulated firm to make positive economic profits. 
C) sometimes leave the regulated firm with economic losses. 
D) leave the regulated firm with profits that are about 10 percent higher than those of other firms.

Question 13

Modern antitrust policy began in response to

Accepted Answer

A) abuses of market power in the oil industry. 
B) the inability of railroads to compete effectively with the new trucking industry. 
C) the charge that the rights of big business were not adequately protected. 
D) attempts by business leaders to pack Congress with corrupt legislators. 
A) abuses of market power in the oil industry. 
B) the inability of railroads to compete effectively with the new trucking industry. 
C) the charge that the rights of big business were not adequately protected. 
D) attempts by business leaders to pack Congress with corrupt legislators.

Question 14

If there are strong economies of scale and scope,then society

Accepted Answer

A) will not be able to prevent overt collusion. 
B) will benefit from establishing a cartel. 
C) cannot benefit from regulation of a natural monopoly. 
D) will not be able to preserve free competition. 
A) will not be able to prevent overt collusion. 
B) will benefit from establishing a cartel. 
C) cannot benefit from regulation of a natural monopoly. 
D) will not be able to preserve free competition.

Question 15

Why are the prices of some regulated industries often higher than they would be if there were no regulation?

Accepted Answer

Regulators are often concerned to preven

Question 16

Following mergers that raised the market shares of two airlines to 79 and 82 percent,respectively,of traffic in their hub cities,prices of service rose and the quantities of service fell,even though in most other markets prices fell and quantities increased.The result suggests that these markets

Accepted Answer

A) were contestable. 
B) were monopolized. 
C) become more competitive due to oligopolistic rivalries. 
D) had no barriers to entry. 
A) were contestable. 
B) were monopolized. 
C) become more competitive due to oligopolistic rivalries. 
D) had no barriers to entry.

Question 17

Which of the following events would increase the four-firm concentration ratio in a milk industry with six firms?

Accepted Answer

A) The two largest milk producers merge. 
B) The largest milk producer buys an ice cream-making plant. 
C) The largest milk producer lures customers away from the second-largest producer. 
D) The four largest milk producers collusively fix prices. 
A) The two largest milk producers merge. 
B) The largest milk producer buys an ice cream-making plant. 
C) The largest milk producer lures customers away from the second-largest producer. 
D) The four largest milk producers collusively fix prices.

Question 18

Antitrust laws prohibit undesirable business practices by firms holding monopoly power.

Accepted Answer

A) True 
 B)False

Question 19

Serious concern for deregulation began to appear in Congress in the 1970s.

Accepted Answer

A) True 
 B)False

Question 20

The share of industry output sold by the top four steel producers in the country are 19%,15%,12%,and 9% respectively.The four-firm concentration ratio for the steel industry is

Accepted Answer

A) 0.19. 
B) 0.55 
C) 0.138 
D) 0.65 
A) 0.19. 
B) 0.55 
C) 0.138 
D) 0.65

Exam 13: Limiting Market Power: Regulation and Antitrust

If all large firms in the economy were broken into smaller firms,the result might be

Regulating firms so that they always receive a guaranteed profit rate will lead to greatest efficiency.

On balance,does market power promote or retard technological innovation?

From an efficiency standpoint,should the courts prosecute all suspected antitrust violations?

If a firm is a natural monopoly,society will benefit if it is broken into several small companies.

Which of the following acts prohibited false advertising?

Some critics of antitrust are worried that some firms

Firms with monopoly power tend to be more efficient than competitive firms.

Deregulation of the airline and trucking industry has (i)resulted in considerable entry of new firms,and (ii)has forced unions in these industries to make large concessions on wages and working conditions.

Deregulation has led to higher prices.

Discuss some of the reasons why monopoly power is considered undesirable.

The prices that are in the public's best interest will

Modern antitrust policy began in response to

If there are strong economies of scale and scope,then society

Why are the prices of some regulated industries often higher than they would be if there were no regulation?

Following mergers that raised the market shares of two airlines to 79 and 82 percent,respectively,of traffic in their hub cities,prices of service rose and the quantities of service fell,even though in most other markets prices fell and quantities increased.The result suggests that these markets

Which of the following events would increase the four-firm concentration ratio in a milk industry with six firms?

Antitrust laws prohibit undesirable business practices by firms holding monopoly power.

Serious concern for deregulation began to appear in Congress in the 1970s.

The share of industry output sold by the top four steel producers in the country are 19%,15%,12%,and 9% respectively.The four-firm concentration ratio for the steel industry is

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production,Inputs,and Cost: Building Blocks for Supply Analysis

Output,Price,and Profit: The Importance of Marginal Analysis

Securities: Business Finance,and the Economy: The Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

The Case for Free Markets I: the Price System

The Shortcomings of Free Markets

The Markets Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

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