Deck 14: Antitrust and Regulation

Question 1

In an antitrust lawsuit, which of the following parties is entitled to receive treble damages?

A)The Antitrust Division of the Justice Department
B)The Federal Trade Commission
C)Private plaintiffs
D)State attorney generals
E)The Department of Labor

Answer 1

Private plaintiffs

Question 2

Which of the following is true of the per se rule?

A)The per se rule was used by U.S. courts from 1914 until the 1920s.
B)The per se rule had the effect of making antitrust policy more liberal.
C)According to the per se rule, activities that were potentially monopolizing tactics were illegal.
D)The per se rule did not allow the mere existence of anti-competitive activities to be sufficient evidence for a guilty verdict.
E)The per se rule was revived by Bush administration.

Answer 2

According to the per se rule, activities that were potentially monopolizing tactics were illegal.

Question 3

Which of the following entities is able to sue a firm for alleged antitrust misbehavior in the U.S.?

A)Department of Illegal Affairs
B)Department of State
C)Department of Homeland Security
D)Department of Justice
E)Department of Labor

Answer 3

Department of Justice

Question 4

The U.S. Justice Department, on the basis of the Herfindahl index, classifies the industries with the value:

A)below 500 as highly competitive; 500-1000 as moderately competitive; and above 1000 as highly concentrated.
B)below 1000 as highly competitive; 1000-1500 as moderately competitive; and above 1500 as highly concentrated.
C)below 500 as highly competitive; 500-1500 as moderately competitive; and above 1500 as highly concentrated.
D)below 1000 as highly competitive; 1000-1800 as moderately competitive; and above 1800 as highly concentrated.
E)below 1500 as highly competitive; 1500-2000 as moderately competitive; and above 2000 as highly concentrated.

Question 5

The first phase of antitrust policy in the U.S. began with the passage of the Sherman Antitrust Act in 1890. To judge a firm's action, the courts in this period used:

A)a per se rule.
B)a rule of reason.
C)a rule of thumb.
D)rules of order.
E)strict enforcement rule.

Question 6

Which of the following is most likely to happen if the Federal Trade Commission (FTC) wins a suit against alleged violators of antitrust law?

A)The FTC will receive compensation up to three times the damage caused.
B)The FTC will not be able to impose substantial penalties.
C)The FTC will force firms to break up through dissolution.
D)The FTC will force firms to merge together.
E)The FTC will file criminal actions that may result in fines but not prison sentences.

Question 7

What are the three phases of antitrust policy in the United States, since 1890?

A)1890 to 1914, the rule of reason; 1914 to the early 1980s, per se; since then, the rule of reason
B)1890 to 1914, per se; 1914 to the early 1980s, the rule of reason; since then, per se
C)1890 to 1914, the rule of reason; 1914 to the early 1980s, per se; since then, no antitrust policy
D)1890 to 1914, the rule of reason; 1914 to the early 1980s, per se; since then, a period of rate of return regulation
E)1890 to 1914, the rule of reason; 1914 to the early 1980s, per se; since then, a period of nationalization

Question 8

Antitrust policy is used to describe government policies and programs that are designed to:

A)promote the creation of trusts, or combinations of independent firms.
B)control the growth of monopoly and enhance competition.
C)deal with the threat of competitive practices to public interests.
D)create an environment in which the government will distrust firms.
E)create an environment in which firms will distrust the government.

Question 9

Which of the following is true of Antitrust policy?

A)Antitrust policy prohibits agreements that allow free trade.
B)Antitrust policy restricts abusive behavior by a firm dominating a market.
C)Antitrust policy allows anti-competitive practices.
D)Antitrust policy restricts subsidies in goods and services.
E)Antitrust policy creates trade barriers like tariffs and quota.

Question 10

The antitrust laws in the United States were created in the late 1800s as a result of :

A)the emergence of large and dominant businesses in railroads, steel, oil, mining and finance.
B)the government decision to take responsibility for the improvement of trade deficit.
C)the first illegal cartel, created in late 1800s.
D)a steep decline in prices of primary goods in the United States.
E)the threats of an external aggression received by the country.

Question 11

Which of the following does the Sherman Antitrust Act forbid?

A)Monopolization or attempts to monopolize
B)All types of price discrimination
C)Competition among firms
D)Unfair methods of competition
E)Privatization of government owned firms

Question 12

Under George W. Bush's administration, antitrust policy:

A)became much more strict.
B)prohibited every merger attempts.
C)focused increasingly on environmental concerns.
D)became more relaxed.
E)ignored financial regulation and corporate scandals.

Question 13

Under the second phase of antitrust policy that began in 1914 in the U.S., the courts used _____ in order to judge the firms' actions.

A)a rule of reason
B)the rule of 72
C)a rule of thirds
D)a per se rule
E)the rule of law

Question 14

The most reliable measure of market concentration is:

A)the Cost of Living index.
B)the Herfindahl-Hirschman index.
C)the Market index.
D)the Market-Value weighted index.
E)the Wholesale Price index.

Question 15

A market is said to be concentrated when:

A)the degree of competition in the market increases.
B)many firms supply to a small number of consumers.
C)the firms producing identical goods are clustered in a particular location.
D)a firm or a few firms are able to dictate the competitive conditions in a market.
E)there is a huge immigration of workers from neighboring areas.

Question 16

Which of the following practices is restricted by the antitrust laws of the United States?

A)Merger of smaller firms into a large firm
B)Entry of new firms in the long run
C)Standardization of products in a market
D)Exit of non-performing firms in the long run
E)Quality differentiation by competitive firms

Question 17

Which of the following practices is not restricted by the antitrust law in the United States?

A)Contracts and conspiracies in restraint of trade
B)Attempts to monopolize a market
C)Mergers that substantially reduces competition
D)Unfair or deceptive acts of competition
E)All forms of quality discrimination

Question 18

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

A)The Anti-Monopoly Act
B)The Sherman Antitrust Act
C)The Trade Act
D)The National Banking Act
E)The Celler-Kefauver Act

Question 19

Which of the following are the three laws that define the U.S government's approach to antitrust?

A)The Wilmington, Jackson, and International Trade Commission Acts
B)The Springfield, Clayton, and Trade Commission Acts
C)The Sherman, Clayton, and Federal Trade Commission Acts
D)The Sherman, Jackson, and Regional Trade Commission Acts
E)The Jackson, Charleston and Sherman Monopoly Restrictive Trade Acts

Question 20

The judicial doctrine, being a monopoly or attempting to monopolize is not in itself illegal; to be illegal, an action had to be shown to have negative economic effects, is called:

A)the "big is bad" policy.
B)the per se rule.
C)predatory price-cutting policy.
D)the rule of law.
E)the rule of reason.

Question 21

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
Refer to Figure 14.1. Identify the fair-rate-of-return price.

A)P₅
B)P₂
C)P₄
D)P₁
E)P₃

Question 22

One necessary step in demonstrating monopolistic behavior is to define the market. In this process, defendants would:

A)claim that the market was not in equilibrium.
B)want the market defined as narrowly as possible.
C)deny that a market existed.
D)assert that the market was not stable.
E)want the market defined as broadly as possible.

Question 23

A Herfindahl index of 5,000 would indicate:

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 24

A monopolistic industry will have a Herfindahl index value of:

A)1.
B)100.
C)500.
D)1000.
E)10.

Question 25

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
According to Figure 14.1, the price under perfect competition will be:

A)P₁.
B)P₃.
C)P₅.
D)P₄.
E)P₂.

Question 26

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
Refer to Figure 14.1. The natural monopolist will charge a price equal to:

A)P₄.
B)P₃.
C)P₂.
D)P₁.
E)P₅.

Question 27

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
Refer to Figure 14.1. If the regulatory agency sets the fair-rate-of-return price, the monopolist will:

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 28

A Herfindahl index value of 20, for a particular industry, indicates that the industry is most likely to be:

A)perfectly competitive.
B)highly concentrated.
C)oligopolistic.
D)monopolistic.
E)made up of illegal firms.

Question 29

A market that is shared equally by 100 firms would have a Herfindahl index of :

A)1.
B)1,000.
C)500.
D)100.
E)50.

Question 30

When regulators require that a natural monopoly sets price equal to average total cost:

A)it is said to be allowing a fair rate of return.
B)the firm earns a super normal profit.
C)the firm shuts down permanently.
D)the firm operates at the profit-maximizing level of output.
E)the firm shuts down temporarily.

Question 31

Consider a market consisting of seven firms with market shares of 40, 20, 10, 10, 8, 7, and 5 percent, respectively. Which of the following statements is true?

A)The four-firm concentration ratio would be 0.03.
B)The Herfindahl index would be 1,000.
C)The Herfindahl index would be 2,228.
D)The Herfindahl index would be 1,500.
E)The Herfindahl index would be 2,338.

Question 32

Which of the following statements is true of price fixing?

A)It represents a high level of competition in an industry.
B)It is allowed only under the provisions of the Federal Trade Commission Act.
C)It is, by definition, illegal, as there is no justification for it.
D)It occurs only in perfectly competitive industries.
E)It is legal in United States.

Question 33

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
Which of the following is a possible reason for governments to regulate business operations?

A)To increase monopoly profits
B)To reduce the amount of information consumers have about a product
C)To increase negative externalities
D)To promote competitive behavior
E)To decrease positive externalities

Question 34

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
According to Figure 14.1, in order to attain allocative efficiency, the regulatory body must attempt to set the price equal to:

A)P₂.
B)P₃.
C)P₁.
D)P₄.
E)P₅.

Question 35

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

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 36

In the United States, monopoly regulation began primarily because:

A)there were no natural monopolies in the real world.
B)the government wanted to promote other forms of business 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 37

Which of the following was formed in October 2001 to make the national antitrust laws more consistent across the developing and developed countries of the world?

A)International Cooperation Network
B)International Competition Network
C)International Communication Network
D)International Organization for Standardization
E)International Court of Justice

Question 38

Which of the following statements best describes the difference between economic regulation and social regulation?

A)Economic regulation has little to do with price and output while social regulation explicitly deals with price and output.
B)Social regulation is concerned with direct redistribution of wealth while economic regulation is concerned with accumulation of wealth.
C)Economic regulation is concerned with direct redistribution of wealth while social regulation is concerned with accumulation of wealth.
D)Social regulation has historically targeted industries such as railroads and airlines while economic regulation has all the industries under its purview.
E)Economic regulation deals with price and output , while social regulation deals with health and safety matters that apply across several industries.

Question 39

Most natural monopolies are regulated at some level by a government because:

A)an unregulated natural monopolist would cause the problem of capital outflow.
B)an unregulated natural monopolist would produce only for government bureaucrats.
C)an unregulated natural monopolist would charge an inefficiently low price in the market.
D)an unregulated natural monopolist would charge an inefficiently high price in the market.
E)an unregulated natural monopolist would incur losses.

Question 40

Consider an oligopoly that has two firms, one with a 75 percent market share and the other with a 25 percent market share. The Herfindahl index for this market is:

A)5,625.
B)6,250.
C)625.
D)5,000.
E)8,500.

Question 41

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
Which of the following calculations is necessary to determine whether a regulation should be implemented?

A)Marginal cost-marginal revenue calculations
B)Cost effectiveness calculations
C)Total cost-total revenue calculations
D)Cost minimization calculations
E)Cost-benefit calculations

Question 42

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Refer to Figure 14.2. The regulation will benefit the society if:

A)area BAJ > area 0FIQ₂.
B)area AECJ > area IGQ₁Q₂.
C)area IGQ₁Q₂ > area AECJ.
D)area BAJ > BAC.
E)area 0FIQ₂ > area BAJ.

Question 43

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Monetary freedom refers to:

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 44

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
When regulating a natural monopoly, government officials face a dilemma that:

A)the efficient price may not allow the firm to break even.
B)the efficient price may lead to an inefficiently high level of output.
C)the efficient price leads to an output level that is too low.
D)the efficient price may force the firm to shut-down.
E)long-run average costs are constantly increasing.

Question 45

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
If social regulation causes the supply curve in a market to shift up because of higher marginal costs, then:

A)both consumer and producer surplus will decrease.
B)both producer and consumer surplus will increase.
C)consumers will gain at the expense of producers.
D)producers will gain at the expense of consumers.
E)there will be no change in the sum of producer and consumer surplus, although its division may change.

Question 46

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
What is the total social surplus prior to regulation, in Figure 14.2?

A)Area 0FGQ₁.
B)Area BEP₁.
C)Area CEP₁.
D)Area FGEP₁.
E)Area BEC.

Question 47

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
Why do the regulated companies oppose deregulation?

A)They would be deprived of an opportunity to compete with other firms.
B)They would be deprived of their rights to continue business.
C)They would be denied any kind of support from the government.
D)They would incur losses on account of increased competition.
E)They would become unpopular as they would no longer be controlled by the government.

Question 48

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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 14.2, the total clean up cost for the society prior to regulation is the:

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

Question 49

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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 14.2, the total clean up cost after the regulation is the:

A)area 0FIQ₂.
B)area 0FGQ₁.
C)area BEC.
D)area BEP₁.
E)area BEGF.

Question 50

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Which of the following is true of the General Agreement on Tariffs and Trade (GATT)?

A)It is now called the World Agreement on Trade and Tariffs.
B)It was the global trade agreement that did away with the gold standard.
C)It was a policy of the United States to raise tariffs on imported sugar.
D)It was the first global trade agreement that followed World War II.
E)It was a global trade agreement to raise tariffs.

Question 51

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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 the Index of Economic Freedom, which of the following is the freest economy in the world?

A)Cuba
B)Zimbabwe
C)Hong Kong
D)North Korea
E)Libya

Question 52

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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 14.2, the total social surplus after the regulation is the:

A)area BEC.
B)area AECJ.
C)area IGQ₁Q₂.
D)area 0FIQ₂.
E)area BAJ.

Question 53

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Which of the following is not a component of the index which measures economic freedom of a country?

A)Monetary freedom
B)Cultural freedom
C)Government size
D)Freedom from corruption
E)Labor freedom

Question 54

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
If social regulation increases a firm's fixed and variable costs:

A)then both marginal cost and average total cost will increase, and the firm will produce more.
B)then both marginal cost and average total cost will increase, and the firm will produce less.
C)then both marginal cost and average total cost will decrease, and profits will increase.
D)then marginal cost will increase, average total cost will be constant, and price will decline.
E)then both price and quantity produced will fall.

Question 55

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Graphically, consumer surplus is the area:

A)above the demand curve.
B)below the supply curve.
C)under the demand curve and 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 56

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Which of the following raises the economic freedom of a country?

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 57

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
To avoid driving a natural monopolist into bankruptcy, regulatory commissions:

A)allow the monopolist to enjoy an economic profit.
B)do not allow the monopolist to make an accounting profit.
C)subsidize the monopolist to help it break even.
D)allow the monopolist to earn a fair rate of return.
E)allow the monopolist to temporarily shut down.

Question 58

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
Which of the following factors will help determine how the costs of social regulation are split between consumers and producers?

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 59

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
Which of the following is an example of the opportunity cost involved with social regulation?

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
E)The monetary cost of manufacturing a life saving drug

Question 60

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
Suppose that the demand for apples in Washington is elastic and the supply is inelastic. If the government of Washington passes a law prohibiting the use of synthetic pesticides that increases the marginal and average costs of producing apples, then:

A)the price of Washington State apples will decline.
B)Washington will stop producing apples, and New York apple growers will benefit.
C)apple growers will pass most of the increased costs on to consumers in the form of higher apple prices.
D)apple growers will keep prices constant but reduce costs by advertising less.
E)apple growers will bear most of the increased costs of regulation, and prices will increase only slightly.

Question 61

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Social regulation means that the government dictates the price that a firm must charge and/or the quantity that a firm must supply.

Question 62

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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 the per se rule, activities that were potentially monopolizing tactics were illegal.

Question 63

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
If there are 50 firms in the industry, and each have an equal market share, the Herfindahl index will be equal to 1,00,000.

Question 64

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
A regulated natural monopoly is allowed to set a price which will enable it to earn an above-normal profit.

Question 65

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
In a natural monopoly, government regulation is often used to ensure more beneficial price and output combinations for consumers in the market than would exist in the absence of regulation.

Question 66

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Restrictions on the types of food additives that breakfast cereal manufacturers can use is an example of a social regulation.

Question 67

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
If a market is narrowly defined, the market share of each firm declines than if it is broadly defined.

Question 68

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Delegates from different countries of the world met at Geneva in April 1947 which resulted in the formation of the first global trade agreement. Its main objective was:

A)to create multiple trade barriers in the member countries.
B)to enable the member countries to maintain their autarkic conditions.
C)to provide security to the domestic producers of the member countries by prohibiting international trade.
D)to create an atmosphere of economic rivalry in the international sphere.
E)to liberalize trade for mutual prosperity of the members.

Question 69

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
One difference between economic and social regulation is that economic regulation usually pertains to a specific industry, whereas social regulation applies to most if not all industries.

Question 70

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Regulation of monopolies is justified on the ground that a monopolist sells too less at a too high price.

Question 71

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
If the Herfindahl index for automobiles take foreign competition into account, the Herfindahl index for the U.S. automobile industry would be significantly higher.

Question 72

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Actions against alleged violators of the antitrust statutes may be initiated by the Justice Department, by the Federal Trade Commission, and by private plaintiffs.

Question 73

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Regulation of enterprises by the government has always been found to make the market more efficient.

Question 74

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Sherman Antitrust Act bans price discrimination that substantially lessens competition or injures particular competitors.

Question 75

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Antitrust policies are a set of measures which are taken to liberate the economy from unnecessary governmental controls.

Question 76

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Being a monopoly or attempting to monopolize act as sufficient evidence that lead to a guilty verdict under the rule of reason.

Question 77

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Antitrust laws in the United States rely more on economic theory and the rule of reason approach, whereas the European Union relies more on the per se approach.

Question 78

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Under the Clinton administration, attempts were made to relax the antitrust enforcement efforts of the Reagan administration.

Question 79

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
When a monopoly is regulated it is required to sell lower output at a lower price.

Question 80

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
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
Although the GATT was supported by most of the countries of the world, yet global trade shrank during the close of the last decade. This was due to:

A)growing suspicion among the nations of the world.
B)hyperinflation in the major economies of the world.
C)the recession which began in 2007.
D)political turmoil in the Asian countries.
E)the desire among the major players to dominate the international market.