Question 1

When regulators become captives of industry, they may

Accepted Answer

A) increase economic efficiency in the market. 
B) support firms that resist demands for wage increases. 
C) increase competition in an industry. 
D) help a firm reallocate out of an industry in which it has losses. 
E) prevent some firms from failing by keeping their prices high.

Question 2

In a natural monopoly, average total cost

Accepted Answer

A) equals marginal cost over the entire range of production. 
B) declines over the entire range of production. 
C) is flat over a wide range of output. 
D) increases over the entire range of production. 
E) decreases for a small amount of output and then increases.

Question 3

Resale price maintenance can never increase economic efficiency.

Accepted Answer

A) True 
 B)False

Question 4

A description of the types of goods and services offered and the geographic area of a market is called

Accepted Answer

A) the large market concept. 
B) competition. 
C) a contestable market boundary. 
D) territorial market boundary. 
E) market definition.

Question 5

Under incentive regulation,

Accepted Answer

A) a firm cannot make a loss. 
B) the regulated price is only imperfectly related to average total cost. 
C) the firm has an incentive to raise revenue. 
D) the regulated price is directly related to average variable cost. 
E) if a firm does poorly, it will get regulatory relief.

Question 6

Regulation of a natural monopoly firm would probably mean the firm would have to

Accepted Answer

A) begin to maximize profits. 
B) charge a lower price and produce a larger quantity of output. 
C) not change its behavior. 
D) charge a higher price and produce a lower quantity of output. 
E) charge a higher price and produce a larger quantity of output.

Question 7

Under average total cost pricing regulations, firms incur losses.

Accepted Answer

A) True 
 B)False

Question 8

Suppose that Industry A has two firms of the same size and Industry B has three firms with 65 percent, 30 percent, and 5 percent market shares, respectively. Which of the following is true of the Herfindahl-Hirschman indexes for the two industries?

Accepted Answer

A) The HHI for Industry A is 50 higher than the HHI for Industry B. 
B) The HHI for Industry A is 50 lower than the HHI for Industry B. 
C) The HHI for Industry A is 150 higher than the HHI for Industry B. 
D) The HHI for Industry A is 150 lower than the HHI for Industry B. 
E) The HHI is the same for both industries.

Question 9

Suppose that within an industry, firm A has 50 percent market share, firm B has 30 percent market share, and firm C has 2 percent market share. Which of the following is not likely to be challenged by the Federal Trade Commission?

Accepted Answer

A) A merger between firms A and B 
B) A merger between firms A and C 
C) A merger between firms B and C 
D) A merger of firms A, B, and C 
E) Any merger among the three firms is likely to be challenged.

Question 10

The Justice Department and the FTC have used economic analysis to develop a quantitative procedure to help define the extent of a market.

Accepted Answer

A) True 
 B)False

Question 11

Some consider the local cable industry to be a natural monopoly. If the cable industry is under incentive regulation, what would be the effect of introducing competitive satellite TV? What should the cable regulatory agency do?

Accepted Answer

The answer of Some consider the local cable industry to...

Question 12

The relative infrequency of government-forced breakups in recent years may be due to

Accepted Answer

A) decreased profitability of U.S.firms. 
B) greater international competition. 
C) government reaction to losing many court cases. 
D) the inability of government to decide which action to take. 
E) the decreased effectiveness of merger policy.

Question 13

The first antitrust law in the United States was the

Accepted Answer

A) Clayton Antitrust Act. 
B) Sherman Antitrust Act. 
C) Celler-Kefauver Act. 
D) Robinson-Patman Act. 
E) Glass-Steagall Act.

Question 14

The demand schedule and total costs for a natural monopoly are given in the table below.

Accepted Answer

The answer of The demand schedule and total costs for...

Question 15

Section 2 of the Sherman Antitrust Act is being used to sue companies for predatory pricing. What is predatory pricing? Why is prosecuting predatory pricing part of competition policy?

Accepted Answer

The answer of Section 2 of the Sherman Antitrust Act...

Question 16

A region over which a manufacturer limits the distribution or selling of its products to one retailer or wholesaler is called a(n)

Accepted Answer

A) uncontested market. 
B) exclusive territory. 
C) captured territory. 
D) strategic market territory. 
E) inclusive territory.

Question 17

The Herfindahl-Hirschman index is measured by

Accepted Answer

A) adding the market shares of the four largest firms in an industry. 
B) calculating the eight-firm concentration ratio for an industry. 
C) summing the squares of the market shares of all firms in an industry. 
D) calculating the four-firm concentration ratio for an industry. 
E) squaring the sum of the market shares of all firms in an industry.

Question 18

In order to reduce the deadweight loss of a natural monopoly, the government can regulate the price such that it is below marginal cost.

Accepted Answer

A) True 
 B)False

Question 19

The average cost curve of a natural monopoly

Accepted Answer

A) is upward-sloping. 
B) is downward-sloping. 
C) is horizontal. 
D) has an inverted U-shape. 
E) is vertical.

Question 20

Price fixing is illegal in the United States.

Accepted Answer

A) True 
 B)False

Exam 12: Antitrust Policy and Regulation

When regulators become captives of industry, they may

In a natural monopoly, average total cost

Resale price maintenance can never increase economic efficiency.

A description of the types of goods and services offered and the geographic area of a market is called

Under incentive regulation,

Regulation of a natural monopoly firm would probably mean the firm would have to

Under average total cost pricing regulations, firms incur losses.

Suppose that Industry A has two firms of the same size and Industry B has three firms with 65 percent, 30 percent, and 5 percent market shares, respectively. Which of the following is true of the Herfindahl-Hirschman indexes for the two industries?

Suppose that within an industry, firm A has 50 percent market share, firm B has 30 percent market share, and firm C has 2 percent market share. Which of the following is not likely to be challenged by the Federal Trade Commission?

The Justice Department and the FTC have used economic analysis to develop a quantitative procedure to help define the extent of a market.

Some consider the local cable industry to be a natural monopoly. If the cable industry is under incentive regulation, what would be the effect of introducing competitive satellite TV? What should the cable regulatory agency do?

The relative infrequency of government-forced breakups in recent years may be due to

The first antitrust law in the United States was the

The demand schedule and total costs for a natural monopoly are given in the table below.

Section 2 of the Sherman Antitrust Act is being used to sue companies for predatory pricing. What is predatory pricing? Why is prosecuting predatory pricing part of competition policy?

A region over which a manufacturer limits the distribution or selling of its products to one retailer or wholesaler is called a(n)

The Herfindahl-Hirschman index is measured by

In order to reduce the deadweight loss of a natural monopoly, the government can regulate the price such that it is below marginal cost.

The average cost curve of a natural monopoly

Price fixing is illegal in the United States.