Question 1

Which of the following factors helps to determine how the costs of social regulation are split between consumers and producers.

Accepted Answer

A) The price elasticities of demand and supply 
B) The quantity produced by the firm 
C) The average total costs of the firm before regulation 
D) The number of consumers in the market 
E) The number of producers in the market 
A) The price elasticities of demand and supply 
B) The quantity produced by the firm 
C) The average total costs of the firm before regulation 
D) The number of consumers in the market 
E) The number of producers in the market

Question 2

An example of the opportunity costs involved with social regulation would be:

Accepted Answer

A) the monetary costs of hiring administrative assistants to fill out OSHA safety reports. 
B) the environmental costs of pollution control required under the Clean Air Act. 
C) the monetary costs of laboratory trials required to try out a new drug. 
D) the lives that are lost because new drugs are not introduced quickly enough. 
E) the monetary cost of manufacturing a life saving drug. 
A) the monetary costs of hiring administrative assistants to fill out OSHA safety reports. 
B) the environmental costs of pollution control required under the Clean Air Act. 
C) the monetary costs of laboratory trials required to try out a new drug. 
D) the lives that are lost because new drugs are not introduced quickly enough. 
E) the monetary cost of manufacturing a life saving drug.

Question 3

If the Herfindahl index for automobiles take foreign competition into account, the Herfindahl index for the U.S.automobile industry would be significantly higher.

Accepted Answer

A) True 
 B)False

Question 4

When the government borrows by having the Treasury Department sell IOUs or bonds to finance deficit, it is not considered as a public debt.

Accepted Answer

A) True 
 B)False

Question 5

Monetary freedom refers to:

Accepted Answer

A) the ability to create and operate an enterprise easily. 
B) the absence of tariff and non-tariff barriers that affect imports of goods. 
C) the tax burden and overall tax revenue of the government. 
D) price stability with an assessment of price control. 
E) the free flow of foreign capital. 
A) the ability to create and operate an enterprise easily. 
B) the absence of tariff and non-tariff barriers that affect imports of goods. 
C) the tax burden and overall tax revenue of the government. 
D) price stability with an assessment of price control. 
E) the free flow of foreign capital.

Question 6

Under the License Raj system in India:

Accepted Answer

A) the producers having the licence could produce as much as they wanted. 
B) the producers were allowed to manufacture goods only for the government. 
C) only the producers having the licence were allowed to import inputs from abroad. 
D) producing beyond the specified limit was a punishable offence. 
E) the producers could only produce to meet their subsistence needs. 
A) the producers having the licence could produce as much as they wanted. 
B) the producers were allowed to manufacture goods only for the government. 
C) only the producers having the licence were allowed to import inputs from abroad. 
D) producing beyond the specified limit was a punishable offence. 
E) the producers could only produce to meet their subsistence needs.

Question 7

Regulation of monopolies is justified on the ground that a monopolist sells too less at a too high price.

Accepted Answer

A) True 
 B)False

Question 8

Privatization occurs when a state owned firm is transferred to private ownership.

Accepted Answer

A) True 
 B)False

Question 9

Economic freedom refers to the freedom of the government to control resources and labor in a country.

Accepted Answer

A) True 
 B)False

Question 10

Graphically, consumer surplus is the area:

Accepted Answer

A) above the demand curve. 
B) below the supply curve. 
C) under the demand curve and above the supply curve. 
D) above the market supply curve and under the equilibrium price. 
E) under the market demand curve and above the equilibrium price. 
A) above the demand curve. 
B) below the supply curve. 
C) under the demand curve and above the supply curve. 
D) above the market supply curve and under the equilibrium price. 
E) under the market demand curve and above the equilibrium price.

Question 11

A Herfindahl index of 5, 000 would indicate:

Accepted Answer

A) a monopoly. 
B) a duopoly (two firms)with equal shares. 
C) an oligopoly with three firms. 
D) a monopolistically competitive industry. 
E) a perfectly competitive market. 
A) a monopoly. 
B) a duopoly (two firms)with equal shares. 
C) an oligopoly with three firms. 
D) a monopolistically competitive industry. 
E) a perfectly competitive market.

Question 12

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation. Figure 26.2   In the figure,
D: Demand curve for automobiles
S1: Supply curve of automobiles prior to regulation
S2: Supply curve of automobiles after regulation
FG: Clean up cost per unit
According to Figure 26.2, the total clean up cost for the society prior to regulation is:

Accepted Answer

A) area 0BEQ1. 
B) area 0FIQ2. 
C) area 0FGQ1. 
D) area 0P1EQ1. 
E) area 0CEQ1. 
A) area 0BEQ1. 
B) area 0FIQ2. 
C) area 0FGQ1. 
D) area 0P1EQ1. 
E) area 0CEQ1.

Question 13

The figure below shows revenue and cost curves of a natural monopoly firm. Figure 26.1   In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
Refer to Figure 26.1.If the regulatory agency sets the fair-rate-of-return price, the monopolist will:

Accepted Answer

A) suspend production. 
B) just break even. 
C) earn super normal profits. 
D) incur losses. 
E) be able to cover only the variable costs. 
A) suspend production. 
B) just break even. 
C) earn super normal profits. 
D) incur losses. 
E) be able to cover only the variable costs.

Question 14

The figure below shows revenue and cost curves of a natural monopoly firm. Figure 26.1   In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
According to Figure 26.1, to attain allocative efficiency the regulatory body must attempt to set the price equal to:

Accepted Answer

A) P2. 
B) P3. 
C) P1. 
D) P4. 
E) P5. 
A) P2. 
B) P3. 
C) P1. 
D) P4. 
E) P5.

Question 15

In the United States, monopoly regulation began primarily because:

Accepted Answer

A) there were no natural monopolies in the real world. 
B) monopolies were especially guilty of unsafe industrial practices. 
C) monopolies did not typically follow occupational and safety rules. 
D) monopolies tended to restrict output and raise prices. 
E) most economists believed that the majority of industries were following the purely competitive model. 
A) there were no natural monopolies in the real world. 
B) monopolies were especially guilty of unsafe industrial practices. 
C) monopolies did not typically follow occupational and safety rules. 
D) monopolies tended to restrict output and raise prices. 
E) most economists believed that the majority of industries were following the purely competitive model.

Question 16

Which of the following raises the economic freedom of a country:

Accepted Answer

A) Limited international movement of productive resources 
B) Higher taxes 
C) Red-tapism and bureaucracy 
D) Reduction of trade barriers like tariffs and quotas 
E) Reduction of government subsidies on gasoline 
A) Limited international movement of productive resources 
B) Higher taxes 
C) Red-tapism and bureaucracy 
D) Reduction of trade barriers like tariffs and quotas 
E) Reduction of government subsidies on gasoline

Question 17

The International Communication Network which is the successor of GATT settles trade disputes among its member countries.

Accepted Answer

A) True 
 B)False

Question 18

If the tax rate increases with an increase in the tax base, the tax is said to be:

Accepted Answer

A) regressive in nature. 
B) a progressive tax. 
C) a proportional tax. 
D) an indirect tax. 
E) inequitable in nature . 
A) regressive in nature. 
B) a progressive tax. 
C) a proportional tax. 
D) an indirect tax. 
E) inequitable in nature .

Question 19

A regulated firm may have an incentive to spend an inefficiently high amount on capital when:

Accepted Answer

A) it becomes deregulated. 
B) fair rate of return regulation is used. 
C) regulators set price equal to marginal cost. 
D) it is part of a monopolistically competitive industry. 
E) it is allowed to charge a monopoly price. 
A) it becomes deregulated. 
B) fair rate of return regulation is used. 
C) regulators set price equal to marginal cost. 
D) it is part of a monopolistically competitive industry. 
E) it is allowed to charge a monopoly price.

Question 20

Which of the following laws was enacted to forbid monopolization and attempts to monopolize?

Accepted Answer

A) The Anti-Monopoly Act 
B) The Sherman Antitrust Act 
C) The Clayton Antitrust Act 
D) The Federal Trade Commission Act 
E) The Celler-Kefauver Act 
A) The Anti-Monopoly Act 
B) The Sherman Antitrust Act 
C) The Clayton Antitrust Act 
D) The Federal Trade Commission Act 
E) The Celler-Kefauver Act

Exam 47: Antitrust and Regulation

Which of the following factors helps to determine how the costs of social regulation are split between consumers and producers.

An example of the opportunity costs involved with social regulation would be:

If the Herfindahl index for automobiles take foreign competition into account, the Herfindahl index for the U.S.automobile industry would be significantly higher.

When the government borrows by having the Treasury Department sell IOUs or bonds to finance deficit, it is not considered as a public debt.

Monetary freedom refers to:

Under the License Raj system in India:

Regulation of monopolies is justified on the ground that a monopolist sells too less at a too high price.

Privatization occurs when a state owned firm is transferred to private ownership.

Economic freedom refers to the freedom of the government to control resources and labor in a country.

Graphically, consumer surplus is the area:

A Herfindahl index of 5, 000 would indicate:

In the United States, monopoly regulation began primarily because:

Which of the following raises the economic freedom of a country:

The International Communication Network which is the successor of GATT settles trade disputes among its member countries.

If the tax rate increases with an increase in the tax base, the tax is said to be:

A regulated firm may have an incentive to spend an inefficiently high amount on capital when:

Which of the following laws was enacted to forbid monopolization and attempts to monopolize?

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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