Question 1

The Federal Trade Commission is an agency that would enforce

Accepted Answer

A)  social regulation. 
B)  economic regulation. 
C)  antitrust laws. 
D)  fair pricing for consumers. 
A)  social regulation. 
B)  economic regulation. 
C)  antitrust laws. 
D)  fair pricing for consumers.

Question 2

-Using a graph, show the price-output combination of a natural monopoly without regulation and the price-output combination if the government requires the monopoly to earn a normal rate of return. What are economic profits in each situation?

Accepted Answer

@#IMG-DLM& In the above figure, the profit-maximiz

Question 3

The federal regulatory agency whose mission is to regulate workplace health and safety is the

Accepted Answer

A)  AFL-CIO. 
B)  FTC. 
C)  OSHA. 
D)  SEC. 
A)  AFL-CIO. 
B)  FTC. 
C)  OSHA. 
D)  SEC.

Question 4

If government regulators make the natural monopolist set price equal to marginal cost

Accepted Answer

A)  the natural monopolist will make zero economic profits. 
B)  the natural monopolist will make normal profits. 
C)  the natural monopolist will make losses and go out of business. 
D)  the natural monopolist will make positive economic profits larger than if it wasn't regulated at all. 
A)  the natural monopolist will make zero economic profits. 
B)  the natural monopolist will make normal profits. 
C)  the natural monopolist will make losses and go out of business. 
D)  the natural monopolist will make positive economic profits larger than if it wasn't regulated at all.

Question 5

The benefits of social regulation are

Accepted Answer

A)  easy to measure by the marginal value method. 
B)  often difficult to measure. 
C)  obvious to almost everyone, but the costs are usually hidden. 
D)  greater than the costs of social regulation in every example in the country today. 
A)  easy to measure by the marginal value method. 
B)  often difficult to measure. 
C)  obvious to almost everyone, but the costs are usually hidden. 
D)  greater than the costs of social regulation in every example in the country today.

Question 6

Regulation of a natural monopoly that forces it to price and produce as if it were a competitive firm results in

Accepted Answer

A)  the market being instantly competitive. 
B)  higher profits for the monopoly. 
C)  economic losses for the monopoly. 
D)  a highly unstable marketplace. 
A)  the market being instantly competitive. 
B)  higher profits for the monopoly. 
C)  economic losses for the monopoly. 
D)  a highly unstable marketplace.

Question 7

Which of the following is illegal according to the antitrust laws?

Accepted Answer

A)  output restrictions 
B)  price discrimination based on cost differences 
C)  vertical mergers 
D)  price fixing 
A)  output restrictions 
B)  price discrimination based on cost differences 
C)  vertical mergers 
D)  price fixing

Question 8

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.

Question 9

-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

Question 10

The problem of excess pollution mainly occurs because of

Accepted Answer

A)  asymmetric information. 
B)  a positive externality. 
C)  a negative externality. 
D)  a monopoly. 
A)  asymmetric information. 
B)  a positive externality. 
C)  a negative externality. 
D)  a monopoly.

Question 11

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 12

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 13

Credence goods are particularly susceptible to the lemons problem because

Accepted Answer

A)  they have qualities that are difficult for producers to fully assess. 
B)  they have qualities that are difficult for consumers to fully assess. 
C)  creative responses among producers create volatility in market supply. 
D)  creative responses among consumers create volatility in market demand. 
A)  they have qualities that are difficult for producers to fully assess. 
B)  they have qualities that are difficult for consumers to fully assess. 
C)  creative responses among producers create volatility in market supply. 
D)  creative responses among consumers create volatility in market demand.

Question 14

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 15

Suppose that a regulated industry experiences an increase in the price of inputs used to produce the good. Which of the following statements is TRUE?

Accepted Answer

A)  Under both the capture theory and the share-the-gains, share-the-pain theory profits will decrease. 
B)  An increase in price will occur quicker in the share-the gains, share-the-pain theory than the capture theory. 
C)  An increase in price will occur quicker in the capture theory than the share-the-gains, share-the-pain theory. 
D)  In the capture theory there will be an increase in price but not in the share-the-gains, share-the-pain theory. 
A)  Under both the capture theory and the share-the-gains, share-the-pain theory profits will decrease. 
B)  An increase in price will occur quicker in the share-the gains, share-the-pain theory than the capture theory. 
C)  An increase in price will occur quicker in the capture theory than the share-the-gains, share-the-pain theory. 
D)  In the capture theory there will be an increase in price but not in the share-the-gains, share-the-pain theory.

Question 16

-Use the above figure. If a commission regulates the above monopoly using marginal cost pricing, then the industry's output will be ________ and the product's price will be ________.

Accepted Answer

A)  Q2; P1 
B)  Q2; P3 
C)  Q3; P2 
D)  Q4; P1 
A)  Q2; P1 
B)  Q2; P3 
C)  Q3; P2 
D)  Q4; P1

Question 17

-In the above figure, what would be the profit-maximizing output and price for this natural monopolist?

Accepted Answer

A)  1,200; $3 
B)  900; $7 
C)  700; $7 
D)  700; $10 
A)  1,200; $3 
B)  900; $7 
C)  700; $7 
D)  700; $10

Question 18

The hypothesis that regulators eventually are controlled by the regulated firms and their special interests is the

Accepted Answer

A)  share-the-gains, share-the-pains hypothesis. 
B)  capture hypothesis. 
C)  public interest theory. 
D)  control-group hypothesis. 
A)  share-the-gains, share-the-pains hypothesis. 
B)  capture hypothesis. 
C)  public interest theory. 
D)  control-group hypothesis.

Question 19

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

Accepted Answer

A)  the Federal Reserve 
B)  Federal Aviation Administration 
C)  Food and Drug Administration 
D)  Federal Deposit Insurance Corporation 
A)  the Federal Reserve 
B)  Federal Aviation Administration 
C)  Food and Drug Administration 
D)  Federal Deposit Insurance Corporation

Question 20

The total costs of federal regulation

Accepted Answer

A)  encompasses only explicit costs of satisfying regulatory demands. 
B)  also includes the explicit costs associated with regulations issued by 50 different state governments. 
C)  encompasses only opportunity costs of satisfying regulatory demands. 
D)  encompasses both explicit and opportunity costs of satisfying regulatory demands.. 
A)  encompasses only explicit costs of satisfying regulatory demands. 
B)  also includes the explicit costs associated with regulations issued by 50 different state governments. 
C)  encompasses only opportunity costs of satisfying regulatory demands. 
D)  encompasses both explicit and opportunity costs of satisfying regulatory demands..

Exam 27: Regulation and Antitrust Policy in a Globalized Economy

The Federal Trade Commission is an agency that would enforce

-Using a graph, show the price-output combination of a natural monopoly without regulation and the price-output combination if the government requires the monopoly to earn a normal rate of return. What are economic profits in each situation?

The federal regulatory agency whose mission is to regulate workplace health and safety is the

If government regulators make the natural monopolist set price equal to marginal cost

The benefits of social regulation are

Regulation of a natural monopoly that forces it to price and produce as if it were a competitive firm results in

Which of the following is illegal according to the antitrust laws?

The Federal Trade Commission Act, as amended, prohibits

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

The problem of excess pollution mainly occurs because of

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

The two basic types of government regulation are

Credence goods are particularly susceptible to the lemons problem because

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

Suppose that a regulated industry experiences an increase in the price of inputs used to produce the good. Which of the following statements is TRUE?

-Use the above figure. If a commission regulates the above monopoly using marginal cost pricing, then the industry's output will be ________ and the product's price will be ________.

-In the above figure, what would be the profit-maximizing output and price for this natural monopolist?

The hypothesis that regulators eventually are controlled by the regulated firms and their special interests is the

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

The total costs of federal regulation

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

Filters

-Use the above figure. If a commission regulates the above monopoly using marginal cost pricing, then the industry's output will be and the product's price will be .