Question 1

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. B

Question 2

One type of economic regulation often used in the United States by various public utility commissions allows prices to reflect only the actual cost of production and no monopoly profits.This type of economic regulation is known as

Accepted Answer

A) rate-of-return regulation. 
B) cost-of-service regulation. 
C) price per constant-quality-unit regulation. 
D) creative response regulation. 
A) rate-of-return regulation. 
B) cost-of-service regulation. 
C) price per constant-quality-unit regulation. 
D) creative response regulation. B

Question 3

-In the above figure,what would be the profit or loss at the marginal cost pricing point 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 D

Question 4

For a firm to be economically efficient from society's point of view,it should produce to the point at which

Accepted Answer

A) marginal cost equals marginal revenue. 
B) marginal cost equals average total cost. 
C) marginal cost equals price. 
D) average total cost equals price. 
A) marginal cost equals marginal revenue. 
B) marginal cost equals average total cost. 
C) marginal cost equals price. 
D) average total cost equals price.

Question 5

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 6

In some cases,social regulation may alter individuals' behavior.For example,there is evidence to indicate that as more automobile safety regulations have been introduced,more individuals have begun to drive recklessly.This phenomenon is known as

Accepted Answer

A) the feedback effect. 
B) the share-the-gains effect. 
C) the share-the-pains effect. 
D) the capture effect. 
A) the feedback effect. 
B) the share-the-gains effect. 
C) the share-the-pains effect. 
D) the capture effect.

Question 7

Acme Inc.found a tricky way to conform to the letter of the law with respect to new EPA regulations,even though they violated the spirit of the law.This is called

Accepted Answer

A) the capture theory. 
B) collusive response. 
C) share-the-gains,share-the-pains theory. 
D) creative response. 
A) the capture theory. 
B) collusive response. 
C) share-the-gains,share-the-pains theory. 
D) creative response.

Question 8

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 9

The major goal of social regulation is

Accepted Answer

A) a better quality of life through a less polluted environment,better working conditions,and safer and better products. 
B) to make sure that firms are not earning monopoly profits. 
C) to make sure that prices are kept low enough so that every person can purchase the good. 
D) to make sure that the firm produces at the socially optimal point of production. 
A) a better quality of life through a less polluted environment,better working conditions,and safer and better products. 
B) to make sure that firms are not earning monopoly profits. 
C) to make sure that prices are kept low enough so that every person can purchase the good. 
D) to make sure that the firm produces at the socially optimal point of production.

Question 10

The law passed by Congress in 1914 that was designed to sharpen or define further the vagueness of the Sherman Act is called

Accepted Answer

A) the Robinson-Patman Act. 
B) the Wheeler-Lea Act. 
C) the Clayton Act. 
D) the Federal Trade Commission Act. 
A) the Robinson-Patman Act. 
B) the Wheeler-Lea Act. 
C) the Clayton Act. 
D) the Federal Trade Commission Act.

Question 11

The U.S.Justice Department prosecuted Microsoft under the terms of

Accepted Answer

A) the Sherman Act. 
B) the Kefauver amendment. 
C) the 1933 amendment to the Federal Trade Commission Act. 
D) none of the above. 
A) the Sherman Act. 
B) the Kefauver amendment. 
C) the 1933 amendment to the Federal Trade Commission Act. 
D) none of the above.

Question 12

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 13

If a public service commission requires a natural monopoly to set its price equal to the long-run marginal cost,this will result in

Accepted Answer

A) excessive economic profits to the monopoly. 
B) normal economic profits to the monopoly. 
C) losses to the monopoly. 
D) either economic profits or losses,depending on the efficiency of the monopoly. 
A) excessive economic profits to the monopoly. 
B) normal economic profits to the monopoly. 
C) losses to the monopoly. 
D) either economic profits or losses,depending on the efficiency of the monopoly.

Question 14

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 15

The act of selling an item in slightly altered forms at different prices and to different groups of consumers is known as

Accepted Answer

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

Question 16

Under rate-of-return regulation,natural monopolies must use

Accepted Answer

A) marginal cost pricing. 
B) average cost pricing. 
C) efficient pricing. 
D) monopoly pricing. 
A) marginal cost pricing. 
B) average cost pricing. 
C) efficient pricing. 
D) monopoly pricing.

Question 17

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 18

The benefits of social regulation usually are

Accepted Answer

A) small. 
B) obvious to people while the costs are hidden. 
C) less than the costs of social regulation,reducing overall welfare. 
D) difficult to measure. 
A) small. 
B) obvious to people while the costs are hidden. 
C) less than the costs of social regulation,reducing overall welfare. 
D) difficult to measure.

Question 19

The first antitrust law that the U.S.Congress enacted was

Accepted Answer

A) the Clayton Antitrust Act. 
B) the Sherman Antitrust Act. 
C) the Robinson-Patman Act. 
D) the Federal Trade Commission Act. 
A) the Clayton Antitrust Act. 
B) the Sherman Antitrust Act. 
C) the Robinson-Patman Act. 
D) the Federal Trade Commission Act.

Question 20

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.

Exam 14: Regulation and Antitrust Policy in a Globalized Economy

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

One type of economic regulation often used in the United States by various public utility commissions allows prices to reflect only the actual cost of production and no monopoly profits.This type of economic regulation is known as

-In the above figure,what would be the profit or loss at the marginal cost pricing point for this natural monopolist?

For a firm to be economically efficient from society's point of view,it should produce to the point at which

The Sherman Act

In some cases,social regulation may alter individuals' behavior.For example,there is evidence to indicate that as more automobile safety regulations have been introduced,more individuals have begun to drive recklessly.This phenomenon is known as

Acme Inc.found a tricky way to conform to the letter of the law with respect to new EPA regulations,even though they violated the spirit of the law.This is called

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

The major goal of social regulation is

The law passed by Congress in 1914 that was designed to sharpen or define further the vagueness of the Sherman Act is called

The U.S.Justice Department prosecuted Microsoft under the terms of

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

If a public service commission requires a natural monopoly to set its price equal to the long-run marginal cost,this will result in

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

The act of selling an item in slightly altered forms at different prices and to different groups of consumers is known as

Under rate-of-return regulation,natural monopolies must use

A natural monopoly owes its existence to

The benefits of social regulation usually are

The first antitrust law that the U.S.Congress enacted was

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

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

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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