Question 1

Why do government regulators not enforce marginal cost pricing for natural monopolies? What are the common regulatory solutions?

Accepted Answer

If government regulators enforce margina

Question 2

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 3

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 4

The Supreme Court has defined the offense of monopolization to

Accepted Answer

A) be when only one firm exists in an industry. 
B) occur when asymmetric information exists. 
C) include the possession of monopoly power and the willful maintenance of that power. 
D) be unfair acts in the practice of commerce. 
A) be when only one firm exists in an industry. 
B) occur when asymmetric information exists. 
C) include the possession of monopoly power and the willful maintenance of that power. 
D) be unfair acts in the practice of commerce.

Question 5

How does social regulation differ from economic regulation?

Accepted Answer

Social regulation focuses on the impact

Question 6

The Supreme Court has defined the offense of monopolization as involving all of the following elements EXCEPT

Accepted Answer

A) the possession of monopoly power in the relevant market. 
B) the willful acquisition of monopoly power. 
C) the ability to grow a business as a consequence of a superior product. 
D) the maintenance of monopoly power. 
A) the possession of monopoly power in the relevant market. 
B) the willful acquisition of monopoly power. 
C) the ability to grow a business as a consequence of a superior product. 
D) the maintenance of monopoly power.

Question 7

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 8

This agency regulates workplace safety and health conditions.

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 9

The two basic types of government regulation are

Accepted Answer

A) monopoly and oligopoly regulation. 
B) labor and environmental regulation. 
C) federal and state industrial regulation. 
D) economic and social regulation. 
A) monopoly and oligopoly regulation. 
B) labor and environmental regulation. 
C) federal and state industrial regulation. 
D) economic and social regulation.

Question 10

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 11

Which of the following is concerned with social regulation?

Accepted Answer

A) Federal Reserve Board 
B) Sherman Commission 
C) Food and Drug Administration 
D) Board of Education 
A) Federal Reserve Board 
B) Sherman Commission 
C) Food and Drug Administration 
D) Board of Education

Question 12

According to the Justice Department and the Federal Trade Commission,a merger would likely be challenged if

Accepted Answer

A) the post-merger industry has an HHI above 1,000 and the HHI rises by more than 100. 
B) the post-merger industry has an HHI above 500 and the HHI rises by more than 50. 
C) the number of firms in the post-merger industry is very large. 
D) the firms' markets are very large. 
A) the post-merger industry has an HHI above 1,000 and the HHI rises by more than 100. 
B) the post-merger industry has an HHI above 500 and the HHI rises by more than 50. 
C) the number of firms in the post-merger industry is very large. 
D) the firms' markets are very large.

Question 13

The Food and Drug Administration (FDA)is an agency that would enforce

Accepted Answer

A) social regulation. 
B) economic regulation. 
C) antitrust laws. 
D) price discrimination. 
A) social regulation. 
B) economic regulation. 
C) antitrust laws. 
D) price discrimination.

Question 14

During the production process Ajax Corporation releases pollution into the air.Ajax Corporation operates in a monopolistic competitive industry.Which of the following statements addresses the pollution situation?

Accepted Answer

A) Ajax is taking advantage of asymmetric information. 
B) This is an example of a market failure and is a reason for the government to regulate the industry. 
C) The quality of the product could be improved if the amount of pollution can be reduced. 
D) This is known as the lemons problem. 
A) Ajax is taking advantage of asymmetric information. 
B) This is an example of a market failure and is a reason for the government to regulate the industry. 
C) The quality of the product could be improved if the amount of pollution can be reduced. 
D) This is known as the lemons problem.

Question 15

Which of the following is NOT an objective of economic regulation?

Accepted Answer

A) to regulate the prices enterprises are allowed to charge 
B) to fix prices so that they are never allowed to rise 
C) to keep rates of return in an industry at a competitive level 
D) to prevent monopoly profits 
A) to regulate the prices enterprises are allowed to charge 
B) to fix prices so that they are never allowed to rise 
C) to keep rates of return in an industry at a competitive level 
D) to prevent monopoly profits

Question 16

The Sherman Antitrust Act of 1890 prohibited

Accepted Answer

A) export tariffs. 
B) attempts to restrain trade. 
C) all existing monopolies. 
D) interstate commerce. 
A) export tariffs. 
B) attempts to restrain trade. 
C) all existing monopolies. 
D) interstate commerce.

Question 17

Which of the following statements about natural monopoly is correct?

Accepted Answer

A) Governments regulate natural monopolies in order to ensure that costs of production are minimized. 
B) Governments regulate natural monopolies in order to ensure that the firm earns a normal profit. 
C) Governments regulate natural monopolies in order to prevent them from making profits. 
D) Governments regulate natural monopolies in order to keep their workers from earning wages that are too high. 
A) Governments regulate natural monopolies in order to ensure that costs of production are minimized. 
B) Governments regulate natural monopolies in order to ensure that the firm earns a normal profit. 
C) Governments regulate natural monopolies in order to prevent them from making profits. 
D) Governments regulate natural monopolies in order to keep their workers from earning wages that are too high.

Question 18

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 19

A firm that responds to a regulatory rule in a way that permits technical compliance while allowing the firm to violate the spirit of the regulation has.

Accepted Answer

A) reduced the scope of the lemons problem. 
B) shared the gains and pains of regulation. 
C) engaged in a creative response to regulation. 
D) become a captured regulator. 
A) reduced the scope of the lemons problem. 
B) shared the gains and pains of regulation. 
C) engaged in a creative response to regulation. 
D) become a captured regulator.

Question 20

Which of the following defines monopoly?

Accepted Answer

A) Sherman Act 
B) Clayton Act 
C) Federal Trade Commission Act 
D) none of the above 
A) Sherman Act 
B) Clayton Act 
C) Federal Trade Commission Act 
D) none of the above

Exam 14: Regulation and Antitrust Policy in a Globalized Economy

Why do government regulators not enforce marginal cost pricing for natural monopolies? What are the common regulatory solutions?

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

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

The Supreme Court has defined the offense of monopolization to

How does social regulation differ from economic regulation?

The Supreme Court has defined the offense of monopolization as involving all of the following elements EXCEPT

The capture hypothesis suggests that

This agency regulates workplace safety and health conditions.

The two basic types of government regulation are

All of the following are regulatory agencies EXCEPT

Which of the following is concerned with social regulation?

According to the Justice Department and the Federal Trade Commission,a merger would likely be challenged if

The Food and Drug Administration (FDA)is an agency that would enforce

During the production process Ajax Corporation releases pollution into the air.Ajax Corporation operates in a monopolistic competitive industry.Which of the following statements addresses the pollution situation?

Which of the following is NOT an objective of economic regulation?

The Sherman Antitrust Act of 1890 prohibited

Which of the following statements about natural monopoly is correct?

In a natural monopoly situation,

A firm that responds to a regulatory rule in a way that permits technical compliance while allowing the firm to violate the spirit of the regulation has.

Which of the following defines monopoly?

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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