Question 1

The potential for a decline in product quality due to asymmetric information is commonly referred to as

Accepted Answer

A) the lemons problem. 
B) planned obsolescence. 
C) diminishing marginal product. 
D) the externality problem. 
A) the lemons problem. 
B) planned obsolescence. 
C) diminishing marginal product. 
D) the externality problem.

Question 2

In average cost pricing,the natural monopoly would have to set price equal to

Accepted Answer

A) AFC. 
B) AVC. 
C) ATC. 
D) MC. 
A) AFC. 
B) AVC. 
C) ATC. 
D) MC.

Question 3

Natural monopolies

Accepted Answer

A) have one lowest-cost producer in an industry. 
B) are not regulated. 
C) have long-run average costs equal to zero. 
D) do not experience economies of scale. 
A) have one lowest-cost producer in an industry. 
B) are not regulated. 
C) have long-run average costs equal to zero. 
D) do not experience economies of scale.

Question 4

Distinguish between cost-of-service regulation and rate-of return regulation.What problem is inherent in both types of regulation?

Accepted Answer

Cost-of-service regulation allows the re

Question 5

-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 6

The total cost of federal regulation includes

Accepted Answer

A) the funding of government agencies overseeing compliance,the compliance cost for the regulated firms,and the opportunity cost of regulation for the firms. 
B) the funding of government agencies overseeing compliance less the compliance cost for the regulated firms and the opportunity cost of regulation for the firms. 
C) only the cost of compliance by the regulated firms. 
D) only the funding of the regulatory agencies. 
A) the funding of government agencies overseeing compliance,the compliance cost for the regulated firms,and the opportunity cost of regulation for the firms. 
B) the funding of government agencies overseeing compliance less the compliance cost for the regulated firms and the opportunity cost of regulation for the firms. 
C) only the cost of compliance by the regulated firms. 
D) only the funding of the regulatory agencies.

Question 7

Which of the following statements regarding economic regulation is TRUE?

Accepted Answer

A) Economic regulation has failed by insisting that firms must be allowed to earn a normal rate of return. 
B) Rate-of-return regulation has been much more effective than cost-of-service regulation. 
C) Economic regulation deals only with rates of return,and not with prices. 
D) Economic regulation deals mainly with prices firms charge,but firms can alter their return by altering quality of service,effectively raising the price per constant-quality-unit. 
A) Economic regulation has failed by insisting that firms must be allowed to earn a normal rate of return. 
B) Rate-of-return regulation has been much more effective than cost-of-service regulation. 
C) Economic regulation deals only with rates of return,and not with prices. 
D) Economic regulation deals mainly with prices firms charge,but firms can alter their return by altering quality of service,effectively raising the price per constant-quality-unit.

Question 8

The reason an unregulated natural monopolist will produce at an economically inefficient quantity is

Accepted Answer

A) due to the fact that the monopolist will equate marginal cost with price to determine the output level. 
B) due to the fact that the monopolist will equate average total cost with price to determine the output level. 
C) that the price does not equal the true marginal cost of producing the good. 
D) that the monopolist will produce a quantity greater than the minimum of the average total cost curve. 
A) due to the fact that the monopolist will equate marginal cost with price to determine the output level. 
B) due to the fact that the monopolist will equate average total cost with price to determine the output level. 
C) that the price does not equal the true marginal cost of producing the good. 
D) that the monopolist will produce a quantity greater than the minimum of the average total cost curve.

Question 9

Which of the following is exempt from antitrust laws?

Accepted Answer

A) Professional basketball 
B) Suppliers of military equipment 
C) Telephone companies 
D) Automobile companies 
A) Professional basketball 
B) Suppliers of military equipment 
C) Telephone companies 
D) Automobile companies

Question 10

Suppose that smart phone producers meet secretly and agree to issue the smart phones of their most successful models sequentially and at the same price that maximizes their profits.After hearing about the secret meeting the U.S.Justice Department is most likely to file charges under the

Accepted Answer

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

Question 11

Another name for the "Chain Store Act" is

Accepted Answer

A) the Sherman Antitrust Act of 1890. 
B) the Clayton Act of 1914. 
C) the Federal Trade Commission Act of 1914. 
D) the Robinson-Patman Act of 1936. 
A) the Sherman Antitrust Act of 1890. 
B) the Clayton Act of 1914. 
C) the Federal Trade Commission Act of 1914. 
D) the Robinson-Patman Act of 1936.

Question 12

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 13

A major shortcoming of the Sherman Act was that

Accepted Answer

A) when it was passed,there were no violations,so the Supreme Court ruled it unnecessary. 
B) it failed to explicitly state which specific activities were illegal. 
C) violators of the Act were forced out of business. 
D) it was not enforced by the courts. 
A) when it was passed,there were no violations,so the Supreme Court ruled it unnecessary. 
B) it failed to explicitly state which specific activities were illegal. 
C) violators of the Act were forced out of business. 
D) it was not enforced by the courts.

Question 14

Suppose that a regulated industry experiences an increase in the price of inputs used to produce the good.According to the share-the-gains,share-the-pain theory,we would expect

Accepted Answer

A) prices to increase by a little immediately and profits to decrease by a lot. 
B) there will be some increase in price but not immediately. 
C) no increase in price. 
D) a quick increase in price maintains profits in the industry. 
A) prices to increase by a little immediately and profits to decrease by a lot. 
B) there will be some increase in price but not immediately. 
C) no increase in price. 
D) a quick increase in price maintains profits in the industry.

Question 15

A common feature of regulated industries is cross-subsidization,which is a situation when one group of customers pays prices above costs while another group of customers pays prices below costs.The one group is subsidizing the other group.Is this practice more consistent with the capture hypothesis or the share-the-gains,share-the-pains theory? Explain.

Accepted Answer

Cross-subsidization is more consistent w

Question 16

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.

Question 17

The Sherman Antitrust Act was passed to

Accepted Answer

A) protect companies from foreign competition. 
B) protect the monopoly profits of firms. 
C) control the growth of monopolies in the U.S. 
D) prevent market price from equaling marginal cost. 
A) protect companies from foreign competition. 
B) protect the monopoly profits of firms. 
C) control the growth of monopolies in the U.S. 
D) prevent market price from equaling marginal cost.

Question 18

"As compared to the benefits of economic and social regulation,the costs are minimal." Do you agree or disagree? Why?

Accepted Answer

Disagree.The total costs of regulation a

Question 19

Explain the share-the-gains,share-the-pains theory.How does it differ from the capture hypothesis?

Accepted Answer

The share-the-gains,share-the-pains theo

Question 20

The Federal Trade Commission Act,as amended,prohibits

Accepted Answer

A) horizontal mergers. 
B) price-fixing agreements. 
C) unfair competitive practices and deceptive acts. 
D) price discrimination. 
A) horizontal mergers. 
B) price-fixing agreements. 
C) unfair competitive practices and deceptive acts. 
D) price discrimination.

The potential for a decline in product quality due to asymmetric information is commonly referred to as

In average cost pricing,the natural monopoly would have to set price equal to

Natural monopolies

Distinguish between cost-of-service regulation and rate-of return regulation.What problem is inherent in both types of regulation?

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

The total cost of federal regulation includes

Which of the following statements regarding economic regulation is TRUE?

The reason an unregulated natural monopolist will produce at an economically inefficient quantity is

Which of the following is exempt from antitrust laws?

Suppose that smart phone producers meet secretly and agree to issue the smart phones of their most successful models sequentially and at the same price that maximizes their profits.After hearing about the secret meeting the U.S.Justice Department is most likely to file charges under the

Another name for the "Chain Store Act" is

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

A major shortcoming of the Sherman Act was that

Suppose that a regulated industry experiences an increase in the price of inputs used to produce the good.According to the share-the-gains,share-the-pain theory,we would expect

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

The Sherman Antitrust Act was passed to

"As compared to the benefits of economic and social regulation,the costs are minimal." Do you agree or disagree? Why?

Explain the share-the-gains,share-the-pains theory.How does it differ from the capture hypothesis?

The Federal Trade Commission Act,as amended,prohibits

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

The potential for a decline in product quality due to asymmetric information is commonly referred to as

In average cost pricing,the natural monopoly would have to set price equal to

Natural monopolies

Distinguish between cost-of-service regulation and rate-of return regulation.What problem is inherent in both types of regulation?

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

The total cost of federal regulation includes

Which of the following statements regarding economic regulation is TRUE?

The reason an unregulated natural monopolist will produce at an economically inefficient quantity is

Which of the following is exempt from antitrust laws?

Suppose that smart phone producers meet secretly and agree to issue the smart phones of their most successful models sequentially and at the same price that maximizes their profits.After hearing about the secret meeting the U.S.Justice Department is most likely to file charges under the

Another name for the "Chain Store Act" is

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

A major shortcoming of the Sherman Act was that

Suppose that a regulated industry experiences an increase in the price of inputs used to produce the good.According to the share-the-gains,share-the-pain theory,we would expect

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

The Sherman Antitrust Act was passed to

"As compared to the benefits of economic and social regulation,the costs are minimal." Do you agree or disagree? Why?

Explain the share-the-gains,share-the-pains theory.How does it differ from the capture hypothesis?

The Federal Trade Commission Act,as amended,prohibits

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