Question 1

The government considers a market to be unconcentrated if its HHI number is less than ____, and highly concentrated if that number exceeds ____.

Accepted Answer

A)  1,000; 2,500
B)  100; 9,000
C)  50; 500
D)  500; 1,300

Question 2

What is not a limitation of antitrust legislation?

Accepted Answer

A)  The government seldom wins.
B)  Anticompetitive behavior may resemble vigorous competition.
C)  It prevents firms from challenging their rivals.
D)  The defendant may go bankrupt.

Question 3

"Cream skimming" usually results in

Accepted Answer

A)  cross-subsidization of markets.
B)  subsidies to rural consumers of the service.
C)  regulations to provide universal service.
D)  monopoly.

Question 4

What is not an effect of deregulation in the airline and trucking industries?

Accepted Answer

A)  Lower prices of many services
B)  Increased entry of new firms into deregulated industries
C)  Lower income to unions working in deregulated industries
D)  Improvements in the quality of services

Question 5

The most important advantages of bigness will be found in industries that show increasing returns to scale.

Accepted Answer

A) True 
 B)False

Question 6

When it is cheaper for one firm to produce a particular product, ____ exist(s) .

Accepted Answer

A)  economies of scale
B)  economies of scope
C)  diminishing marginal returns
D)  cross-subsidization

Question 7

If an industry consists of five firms each with a 20 percent market share, then the Herfindahl-Hirschman index would equal 1,600.

Accepted Answer

A) True 
 B)False

Question 8

Why is regulation necessary to achieve "universal service"?

Accepted Answer

Universal service refers to making a ser...

Question 9

Discuss some of the reasons why monopoly power is considered undesirable.

Accepted Answer

Some of the reasons are:
1.Hi...

Question 10

Compare the advantages and disadvantages of marginal and average cost pricing for natural monopolies.

Accepted Answer

Marginal cost is the correct cost to use...

Question 11

Prices that maximize the public interest will always allow reasonable profits for firms.

Accepted Answer

A) True 
 B)False

Question 12

Beginning in the mid-1970s, Congress deregulated several industries including airlines and trucking.

Accepted Answer

A) True 
 B)False

Question 13

Cross-subsidization implies that a loss from one product's sales will be made up by the profit from another product's sales.

Accepted Answer

A) True 
 B)False

Question 14

In a market with only one firm (a pure monopoly), the Herfindahl-Hirschman Index (HHI)would equal 10,000.

Accepted Answer

A) True 
 B)False

Question 15

One reason regulators push for higher prices in an industry is to

Accepted Answer

A)  prevent excess profits in the industry.
B)  protect the public from excessively low prices.
C)  encourage usage of the good or service.
D)  protect against the demise of existing firms.

Question 16

The Antitrust Division of the Department of Justice carefully scrutinizes mergers. Why?

Accepted Answer

Mergers can lead to an increase in marke...

Question 17

A monopoly firm operates with declining average cost. If regulators impose marginal cost pricing, the market will

Accepted Answer

A)  remain a monopoly but behave like a perfectly competitive industry.
B)  become perfectly competitive.
C)  be entered by additional firms but will not necessarily become perfectly competitive.
D)  maximize consumer surplus.

Question 18

Service to consumers of deregulated products has generally not diminished.

Accepted Answer

A) True 
 B)False

Question 19

Distinguish between predatory pricing strategy and bundling strategy.

Accepted Answer

Predatory pricing is pricing that threat...

Question 20

List and discuss the importance of the major effects of the deregulation that occurred in the 1980s.

Accepted Answer

Baumol and Blinder list seven effects:
...

Exam 14: Limiting Market Power: Antitrust and Regulation

A monopoly firm operates with declining average cost. If regulators impose marginal cost pricing, the market will

Correct AnswerverifiedShow Answer

Prices that maximize the public interest will always allow reasonable profits for firms.

Correct AnswerverifiedShow Answer

List and discuss the importance of the major effects of the deregulation that occurred in the 1980s.

Correct AnswerverifiedBaumol and Blinder list seven effects: ...View AnswerShow Answer

Cross-subsidization implies that a loss from one product's sales will be made up by the profit from another product's sales.

Correct AnswerverifiedShow Answer

In a market with only one firm (a pure monopoly), the Herfindahl-Hirschman Index (HHI)would equal 10,000.

Correct AnswerverifiedShow Answer

Why is regulation necessary to achieve "universal service"?

Correct AnswerverifiedUniversal service refers to making a ser...View AnswerShow Answer

Compare the advantages and disadvantages of marginal and average cost pricing for natural monopolies.

Correct AnswerverifiedMarginal cost is the correct cost to use...View AnswerShow Answer

When it is cheaper for one firm to produce a particular product, ____ exist(s) .

Correct AnswerverifiedShow Answer

What is not an effect of deregulation in the airline and trucking industries?

Correct AnswerverifiedShow Answer

Distinguish between predatory pricing strategy and bundling strategy.

Correct AnswerverifiedPredatory pricing is pricing that threat...View AnswerShow Answer

What is not a limitation of antitrust legislation?

Correct AnswerverifiedShow Answer

The Antitrust Division of the Department of Justice carefully scrutinizes mergers. Why?

Correct AnswerverifiedMergers can lead to an increase in marke...View AnswerShow Answer

"Cream skimming" usually results in

Correct AnswerverifiedShow Answer

Service to consumers of deregulated products has generally not diminished.

Correct AnswerverifiedShow Answer

The government considers a market to be unconcentrated if its HHI number is less than ____, and highly concentrated if that number exceeds ____.

Correct AnswerverifiedShow Answer

If an industry consists of five firms each with a 20 percent market share, then the Herfindahl-Hirschman index would equal 1,600.

Correct AnswerverifiedShow Answer

Discuss some of the reasons why monopoly power is considered undesirable.

Correct AnswerverifiedSome of the reasons are: 1.Hi...View AnswerShow Answer

Beginning in the mid-1970s, Congress deregulated several industries including airlines and trucking.

Correct AnswerverifiedShow Answer

One reason regulators push for higher prices in an industry is to

Correct AnswerverifiedShow Answer

The most important advantages of bigness will be found in industries that show increasing returns to scale.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Baumol and Blinder list seven effects:
...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Universal service refers to making a ser...
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Correct Answer
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Marginal cost is the correct cost to use...
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Correct Answer
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Correct Answer
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Correct Answer
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Predatory pricing is pricing that threat...
View Answer

Correct Answer
verified

Correct Answer
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Mergers can lead to an increase in marke...
View Answer

Correct Answer
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Correct Answer
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The government considers a market to be unconcentrated if its HHI number is less than , and highly concentrated if that number exceeds .

Correct Answer
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Correct Answer
verified

Correct Answer
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Some of the reasons are:
1.Hi...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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