Question 1

-In the above figure, which of the following statements is FALSE if the firm is operating at output level Q2?

Accepted Answer

A)  The output is equivalent to an unregulated monopolist. 
B)  Economic profits are positive. 
C)  The price is lower than at an equivalent firm forced by regulators to charge ATC pricing. 
D)  Average costs would be lowered by expanding output. 
A)  The output is equivalent to an unregulated monopolist. 
B)  Economic profits are positive. 
C)  The price is lower than at an equivalent firm forced by regulators to charge ATC pricing. 
D)  Average costs would be lowered by expanding output.

Question 2

Suppose a dangerous workplace is made safer through the installation of guards and other equipment that reduce the physical hazards of the work environment. If we observe no reduction in injuries, we might conclude that

Accepted Answer

A)  the safety equipment isn't adequate and better equipment should be installed. 
B)  the firm has responded by lowering wages and hiring less capable people who are more likely to be injured. 
C)  the injury rate before installation of the safety equipment had been underreported. 
D)  workers responded to the safer environment by not exercising as much care themselves, generating more injuries than if they had not changed their behavior. 
A)  the safety equipment isn't adequate and better equipment should be installed. 
B)  the firm has responded by lowering wages and hiring less capable people who are more likely to be injured. 
C)  the injury rate before installation of the safety equipment had been underreported. 
D)  workers responded to the safer environment by not exercising as much care themselves, generating more injuries than if they had not changed their behavior.

Question 3

For a natural monopoly, long-run average costs

Accepted Answer

A)  fall as output increases. 
B)  rise as output increases. 
C)  fall as output falls. 
D)  rise as output falls. 
A)  fall as output increases. 
B)  rise as output increases. 
C)  fall as output falls. 
D)  rise as output falls.

Question 4

-In the above figure, if this natural monopolist were regulated and allowed to earn a "fair" rate of return, it would sell the product at the price

Accepted Answer

A)  A. 
B)  C. 
C)  B. 
D)  F. 
A)  A. 
B)  C. 
C)  B. 
D)  F.

Question 5

The Sherman Antitrust Act was enforced in 1906 by a ruling of the Supreme Court regarding the monopolization of the oil industry by

Accepted Answer

A)  Getty Oil of Oklahoma. 
B)  Texaco Oil of Texas. 
C)  Gulf Oil of Pennsylvania. 
D)  Standard Oil of New Jersey. 
A)  Getty Oil of Oklahoma. 
B)  Texaco Oil of Texas. 
C)  Gulf Oil of Pennsylvania. 
D)  Standard Oil of New Jersey.

Question 6

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 7

Which of the following federal agencies is NOT engaged in social regulation?

Accepted Answer

A)  Environmental Protection Agency 
B)  Federal Trade Commission 
C)  Food and Drug Administration 
D)  Federal Deposit Insurance Corporation 
A)  Environmental Protection Agency 
B)  Federal Trade Commission 
C)  Food and Drug Administration 
D)  Federal Deposit Insurance Corporation

Question 8

The two most important rationales for government intervention in non-monopolistic markets are

Accepted Answer

A)  market failure and asymmetric information. 
B)  substandard products and job creation for public employees. 
C)  job creation and income maintenance. 
D)  unfair pricing and usury. 
A)  market failure and asymmetric information. 
B)  substandard products and job creation for public employees. 
C)  job creation and income maintenance. 
D)  unfair pricing and usury.

Question 9

The cost of complying with regulation

Accepted Answer

A)  shifts the ATC curve upward. 
B)  shifts the MC curve downward. 
C)  shifts the demand curve to the right. 
D)  increases the products' price elasticity of demand. 
A)  shifts the ATC curve upward. 
B)  shifts the MC curve downward. 
C)  shifts the demand curve to the right. 
D)  increases the products' price elasticity of demand.

Question 10

The first antitrust law in the United States was the

Accepted Answer

A)  Glass-Steagall Act. 
B)  Robinson-Patman Act. 
C)  Clayton Act. 
D)  Sherman Act. 
A)  Glass-Steagall Act. 
B)  Robinson-Patman Act. 
C)  Clayton Act. 
D)  Sherman Act.

Question 11

Elmo's gas station in El Paso only sells gasoline if customers also purchase its car wash service.

Accepted Answer

A)  This is called a tie-in sale and is in violation of antitrust laws. 
B)  This is not in violation of antitrust laws, as cars need both gasoline and car wash. 
C)  This is not in violation of antitrust laws, as consumers get the gasoline below market prices. 
D)  This is in violation of the Robinson-Patman Act. 
A)  This is called a tie-in sale and is in violation of antitrust laws. 
B)  This is not in violation of antitrust laws, as cars need both gasoline and car wash. 
C)  This is not in violation of antitrust laws, as consumers get the gasoline below market prices. 
D)  This is in violation of the Robinson-Patman Act.

Question 12

Why is antitrust legislation necessary?

Accepted Answer

A)  Monopolies tend to misallocate resources. 
B)  All monopolies are unlawful in the United States. 
C)  Monopolies tend to allocate resources in a socially optimal manner. 
D)  Monopolies will always make a profit in the long run. 
A)  Monopolies tend to misallocate resources. 
B)  All monopolies are unlawful in the United States. 
C)  Monopolies tend to allocate resources in a socially optimal manner. 
D)  Monopolies will always make a profit in the long run.

Question 13

This agency is responsible for regulating the quality and safety of foods, health and medical products, pharmaceuticals, cosmetics, and animal feed.

Accepted Answer

A)  Environmental Protection Agency 
B)  Food and Drug Administration 
C)  Equal Employment Opportunity Commission 
D)  Federal Trade Commission 
A)  Environmental Protection Agency 
B)  Food and Drug Administration 
C)  Equal Employment Opportunity Commission 
D)  Federal Trade Commission

Question 14

The "primary motive" of regulators, according to the share-the-gains, share-the-pains theory, is to

Accepted Answer

A)  maximize their income through accepting monetary payoffs from groups. 
B)  ensure that every group gets what it wants. 
C)  ensure that all customers share the benefits of regulation, and not just the wealthiest consumers. 
D)  keep their jobs. 
A)  maximize their income through accepting monetary payoffs from groups. 
B)  ensure that every group gets what it wants. 
C)  ensure that all customers share the benefits of regulation, and not just the wealthiest consumers. 
D)  keep their jobs.

Question 15

The benefits of social regulation usually are

Accepted Answer

A)  always a zero sum. 
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)  always a zero sum. 
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 16

The Federal Trade Commission Act was designed to

Accepted Answer

A)  prohibit bundling. 
B)  increase foreign trade. 
C)  prohibit cutthroat pricing. 
D)  limit company profits from foreign sales. 
A)  prohibit bundling. 
B)  increase foreign trade. 
C)  prohibit cutthroat pricing. 
D)  limit company profits from foreign sales.

Question 17

This agency is responsible for protecting consumers from products posing fire, electrical, chemical, or mechanical hazards or dangers to children.

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 18

What is the difference between holding a monopoly and monopolization? Which is illegal? Explain.

Accepted Answer

Monopolization involves having a monopol

Question 19

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 20

Under rate-of-return regulation, the price is set so that

Accepted Answer

A)  price equals the marginal cost of production. 
B)  the firm earns a positive economic profit. 
C)  the firm earns a monopoly profit. 
D)  the firm earns a normal rate of return on investment. 
A)  price equals the marginal cost of production. 
B)  the firm earns a positive economic profit. 
C)  the firm earns a monopoly profit. 
D)  the firm earns a normal rate of return on investment.

Exam 27: Regulation and Antitrust Policy in a Globalized Economy

-In the above figure, which of the following statements is FALSE if the firm is operating at output level Q2?

Suppose a dangerous workplace is made safer through the installation of guards and other equipment that reduce the physical hazards of the work environment. If we observe no reduction in injuries, we might conclude that

For a natural monopoly, long-run average costs

-In the above figure, if this natural monopolist were regulated and allowed to earn a "fair" rate of return, it would sell the product at the price

The Sherman Antitrust Act was enforced in 1906 by a ruling of the Supreme Court regarding the monopolization of the oil industry by

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

Which of the following federal agencies is NOT engaged in social regulation?

The two most important rationales for government intervention in non-monopolistic markets are

The cost of complying with regulation

The first antitrust law in the United States was the

Elmo's gas station in El Paso only sells gasoline if customers also purchase its car wash service.

Why is antitrust legislation necessary?

This agency is responsible for regulating the quality and safety of foods, health and medical products, pharmaceuticals, cosmetics, and animal feed.

The "primary motive" of regulators, according to the share-the-gains, share-the-pains theory, is to

The benefits of social regulation usually are

The Federal Trade Commission Act was designed to

This agency is responsible for protecting consumers from products posing fire, electrical, chemical, or mechanical hazards or dangers to children.

What is the difference between holding a monopoly and monopolization? Which is illegal? Explain.

An agency that regulates labor markets is the

Under rate-of-return regulation, the price is set so that

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

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

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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