Question 1

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 2

Suppose technical change makes it cheaper for cable television suppliers to supply their service.The capture theory would predict that the regulators would

Accepted Answer

A) allow the firms to capture the savings and would lower price only if the firms asked them to. 
B) force the firms to pass 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 permit them to keep some of the savings for themselves. 
A) allow the firms to capture the savings and would lower price only if the firms asked them to. 
B) force the firms to pass 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 permit them to keep some of the savings for themselves.

Question 3

The following table depicts the cost and demand structure a natural monopoly faces.Provided that the firm operates as a monopolist,what is the price charged and quantity produced in order to maximize profits? $$\begin{array} { c c c c c c } 
\text { Quantity } & \text { Price (\$) } & \begin{array} { c } 
\text { Total } \
\text { Revenue }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Revenue }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Cost }
\end{array} \
\hline 0 & 1,000 & 0 & 0 & 0 & 0 \
1 & 900 & 900 & 900 & 800 & 800 \
2 & 800 & 1,600 & 700 & 1,400 & 600 \
3 & 700 & 2,100 & 500 & 1,900 & 500 \
4 & 600 & 2,400 & 300 & 2,400 & 500 \
5 & 500 & 2,500 & 100 & 2,800 & 400 \
6 & 400 & 2,400 & 100 & 3,200 & 400
\end{array}$$

Accepted Answer

A) price charged of $900 and quantity produced of 1 
B) price charged of $800 and quantity produced of 2 
C) price charged of $700 and quantity produced of 3 
D) price charged of $600 and quantity produced of 4 
A) price charged of $900 and quantity produced of 1 
B) price charged of $800 and quantity produced of 2 
C) price charged of $700 and quantity produced of 3 
D) price charged of $600 and quantity produced of 4

Question 4

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

Accepted Answer

A) P1 
B) P2 
C) P3 
D) P5 
A) P1 
B) P2 
C) P3 
D) P5

Question 5

It is illegal to price discriminate except in cases in which the price differences are due to actual cost differences.This situation is due to which antitrust act?

Accepted Answer

A) Clayton Act 
B) Contestable Market Act 
C) Federal Trade Commission Act 
D) Sherman Antitrust Act 
A) Clayton Act 
B) Contestable Market Act 
C) Federal Trade Commission Act 
D) Sherman Antitrust Act

Question 6

Suppose that a regulatory agency has imposed marginal cost pricing on a natural monopolist.We expect that

Accepted Answer

A) the firm will earn only a normal profit. 
B) the firm's average total cost of production is rising over the relevant range of production. 
C) the firm will earn economic profits. 
D) the firm will eventually go out of business. 
A) the firm will earn only a normal profit. 
B) the firm's average total cost of production is rising over the relevant range of production. 
C) the firm will earn economic profits. 
D) the firm will eventually go out of business.

Question 7

The idea behind antitrust legislation is to

Accepted Answer

A) promote competition in the market. 
B) justify deregulation of industries. 
C) implement contestable markets. 
D) create larger firms. 
A) promote competition in the market. 
B) justify deregulation of industries. 
C) implement contestable markets. 
D) create larger firms.

Question 8

One goal of rate-of-return regulation is the prevention of

Accepted Answer

A) free market entry. 
B) positive economic profits. 
C) poor quality service. 
D) environmental degradation. 
A) free market entry. 
B) positive economic profits. 
C) poor quality service. 
D) environmental degradation.

Question 9

Which of the following is exempt from antitrust laws?

Accepted Answer

A) Professional football 
B) Petroleum companies 
C) Airlines 
D) Hospitals 
A) Professional football 
B) Petroleum companies 
C) Airlines 
D) Hospitals

Question 10

A measure of monopoly power used by the government is the

Accepted Answer

A) percentage share of the relevant market or market share test. 
B) profit of the firm compared to other firms in the industry. 
C) price charged by the firm for goods and services. 
D) percentage difference between price and marginal cost. 
A) percentage share of the relevant market or market share test. 
B) profit of the firm compared to other firms in the industry. 
C) price charged by the firm for goods and services. 
D) percentage difference between price and marginal cost.

Question 11

Since 1970,federal expenditures by regulatory agencies have

Accepted Answer

A) remained constant. 
B) decreased slightly. 
C) increased dramatically. 
D) increased slightly. 
A) remained constant. 
B) decreased slightly. 
C) increased dramatically. 
D) increased slightly.

Question 12

Which of the following is the outcome of the lemons problem in the used-car market?

Accepted Answer

A) Only low-quality cars will be traded in the market. 
B) Only high-quality cars will be traded in the market. 
C) Both low-quality and high-quality cars will be traded in the market. 
D) No cars will be traded in the market. 
A) Only low-quality cars will be traded in the market. 
B) Only high-quality cars will be traded in the market. 
C) Both low-quality and high-quality cars will be traded in the market. 
D) No cars will be traded in the market.

Question 13

Without any regulation,the natural monopolist will

Accepted Answer

A) not produce any output. 
B) produce to the point at which P = ATC. 
C) produce less output than it would if the industry was purely competitive. 
D) have an upward-shifting average cost curve. 
A) not produce any output. 
B) produce to the point at which P = ATC. 
C) produce less output than it would if the industry was purely competitive. 
D) have an upward-shifting average cost curve.

Question 14

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 15

An unregulated natural monopolist would produce to the point at which

Accepted Answer

A) P = AC. 
B) MR = AC. 
C) MR = MC. 
D) P = MR. 
A) P = AC. 
B) MR = AC. 
C) MR = MC. 
D) P = MR.

Question 16

In the United States,antitrust enforcement focuses on

Accepted Answer

A) the profitability of the leading firms in an industry. 
B) the degree of market concentration within a market. 
C) the average level of prices charged by firms. 
D) the price-cost margin of an industry. 
A) the profitability of the leading firms in an industry. 
B) the degree of market concentration within a market. 
C) the average level of prices charged by firms. 
D) the price-cost margin of an industry.

Question 17

An agency that regulates labor markets is the

Accepted Answer

A) Equal Employment Opportunity Commission. 
B) Environmental Protection Agency. 
C) Federal Trade Commission. 
D) Consumer Product Safety Commission. 
A) Equal Employment Opportunity Commission. 
B) Environmental Protection Agency. 
C) Federal Trade Commission. 
D) Consumer Product Safety Commission.

Question 18

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 19

-Refer to the above figure.An unregulated natural monopolist's profits will be

Accepted Answer

A) profits equal to $\mathrm { Q } _ { 1 }$ times distance a-c. 
B) losses equal to $\mathrm { Q } _ { 4 }$ times distance f-g. 
C) losses equal to $\mathrm { Q } _ { 3 }$ times distance d-e. 
D) profits equal to $\mathrm { Q } _ { 1 }$ times distance a-b. 
A) profits equal to $\mathrm { Q } _ { 1 }$ times distance a-c. 
B) losses equal to $\mathrm { Q } _ { 4 }$ times distance f-g. 
C) losses equal to $\mathrm { Q } _ { 3 }$ times distance d-e. 
D) profits equal to $\mathrm { Q } _ { 1 }$ times distance a-b.

Question 20

According to the text,the federal government spends the most taxpayer-provided funds regulating which area of the economy?

Accepted Answer

A) The environment 
B) Finance and banking 
C) Consumer safety and health 
D) Transportation 
A) The environment 
B) Finance and banking 
C) Consumer safety and health 
D) Transportation

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

Suppose technical change makes it cheaper for cable television suppliers to supply their service.The capture theory would predict that the regulators would

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

It is illegal to price discriminate except in cases in which the price differences are due to actual cost differences.This situation is due to which antitrust act?

Suppose that a regulatory agency has imposed marginal cost pricing on a natural monopolist.We expect that

The idea behind antitrust legislation is to

One goal of rate-of-return regulation is the prevention of

Which of the following is exempt from antitrust laws?

A measure of monopoly power used by the government is the

Since 1970,federal expenditures by regulatory agencies have

Which of the following is the outcome of the lemons problem in the used-car market?

Without any regulation,the natural monopolist will

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

An unregulated natural monopolist would produce to the point at which

In the United States,antitrust enforcement focuses on

An agency that regulates labor markets is the

All of the following are exempt from antitrust lawsuits EXCEPT

-Refer to the above figure.An unregulated natural monopolist's profits will be

According to the text,the federal government spends the most taxpayer-provided funds regulating which area of the economy?

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

Filters

Exam 14: Regulation and Antitrust Policy in a Globalized Economy

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

Suppose technical change makes it cheaper for cable television suppliers to supply their service.The capture theory would predict that the regulators would

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

It is illegal to price discriminate except in cases in which the price differences are due to actual cost differences.This situation is due to which antitrust act?

Suppose that a regulatory agency has imposed marginal cost pricing on a natural monopolist.We expect that

The idea behind antitrust legislation is to

One goal of rate-of-return regulation is the prevention of

Which of the following is exempt from antitrust laws?

A measure of monopoly power used by the government is the

Since 1970,federal expenditures by regulatory agencies have

Which of the following is the outcome of the lemons problem in the used-car market?

Without any regulation,the natural monopolist will

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

An unregulated natural monopolist would produce to the point at which

In the United States,antitrust enforcement focuses on

An agency that regulates labor markets is the

All of the following are exempt from antitrust lawsuits EXCEPT

-Refer to the above figure.An unregulated natural monopolist's profits will be

According to the text,the federal government spends the most taxpayer-provided funds regulating which area of the economy?

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

Filters