Question 1

The Justice Department and the Federal Trade Commission are likely to oppose mergers

Accepted Answer

A)  that seem likely to increase efficiency.
B)  that create a larger firm with economies of scale in a contestable market.
C)  which will help one of the merging firms out of financial difficulties.
D)  which threaten to reduce competition.

Question 2

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 3

Major firms charged with predatory pricing defend by saying that their prices are low because of superior efficiency.

Accepted Answer

A) True 
 B)False

Question 4

One possible solution to improve performance of regulated firms is which of the following?

Accepted Answer

A)  Allow the firm to set its own rate of return.
B)  Allow higher rates of return to cover higher cost of better performance.
C)  Allow a higher rate of return for better performance.
D)  Set lower prices when efficiency improves.

Question 5

Service to consumers of deregulated products has generally not diminished.

Accepted Answer

A) True 
 B)False

Question 6

Economists ordinarily favor setting price equal to marginal cost when this option is feasible.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

Mergers can lead to an increase in marke...

Question 8

The current deregulatory movement began to change laws to deregulation in the

Accepted Answer

A)  early 1970s.
B)  late 1970s.
C)  early 1980s.
D)  early 1990s.

Question 9

The federal government is most likely to oppose

Accepted Answer

A)  the purchase of a firm in danger of bankruptcy by a successful firm.
B)  a merger between two firms in a perfectly competitive industry.
C)  the purchase of one oligopolist by another in an industry with contestable markets.
D)  a merger between two firms in a three-firm industry.

Question 10

Economists cite some beneficial effects of price discrimination.What are these benefits and how do the antitrust laws treat price discrimination?

Accepted Answer

Benefits include the ability to sell a p...

Question 11

The share of industry output sold by the top four steel producers in the country are 19%, 15%, 12%, and 9% respectively.The four-firm concentration ratio for the steel industry is

Accepted Answer

A)  0.19.
B)  0.55 
C)  0.138 
D)  0.65

Question 12

Regulators often raise prices instead of lowering them.This is designed to

Accepted Answer

A)  prevent the exit of competitors.
B)  protect the consumer from cheap products.
C)  ensure high-quality products.
D)  ensure workers are adequately paid.

Question 13

In highly contestable markets, increases in concentration will enhance market power.

Accepted Answer

A) True 
 B)False

Question 14

Airline deregulation has led to: (i)  lower prices; (ii)  a deterioration of service to isolated communities.

Accepted Answer

A)  i and ii 
B)  i but not ii 
C)  ii but not i 
D)  neither i nor ii

Question 15

The main instrument of control of public monopolies is the regulatory agency.

Accepted Answer

A) True 
 B)False

Question 16

A regulatory agency concerned with "universal service" must

Accepted Answer

A)  prevent high profits in all markets.
B)  prevent entry in high-profit markets.
C)  prevent cross-subsidization.
D)  guarantee marginal cost pricing.

Question 17

Increasing concentration always means an industry has become effectively monopolized.

Accepted Answer

A) True 
 B)False

Question 18

Economies of scale imply: (i)  a continuously falling AC curve; (ii)  a larger output is more efficient than a smaller output.

Accepted Answer

A)  i and ii 
B)  i but not ii 
C)  ii but not i 
D)  neither i nor ii

Question 19

The government used the Herfindahl-Hirschman index to determine if a proposed merger will lead to excessive concentration.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following events would increase the four-firm concentration ratio in a milk industry with six firms?

Accepted Answer

A)  The two largest milk producers merge.
B)  The largest milk producer buys an ice cream-making plant.
C)  The largest milk producer lures customers away from the second-largest producer.
D)  The four largest milk producers collusively fix prices.

Exam 13: Limiting Market Power: Regulation and Antitrust

Economists cite some beneficial effects of price discrimination.What are these benefits and how do the antitrust laws treat price discrimination?

Correct AnswerverifiedBenefits include the ability to sell a p...View AnswerShow Answer

The federal government is most likely to oppose

Correct AnswerverifiedShow Answer

In highly contestable markets, increases in concentration will enhance market power.

Correct AnswerverifiedShow Answer

Regulators often raise prices instead of lowering them.This is designed to

Correct AnswerverifiedShow Answer

The current deregulatory movement began to change laws to deregulation in the

Correct AnswerverifiedShow Answer

The main instrument of control of public monopolies is the regulatory agency.

Correct AnswerverifiedShow Answer

The share of industry output sold by the top four steel producers in the country are 19%, 15%, 12%, and 9% respectively.The four-firm concentration ratio for the steel industry is

Correct AnswerverifiedShow Answer

One possible solution to improve performance of regulated firms is which of the following?

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

Service to consumers of deregulated products has generally not diminished.

Correct AnswerverifiedShow Answer

Major firms charged with predatory pricing defend by saying that their prices are low because of superior efficiency.

Correct AnswerverifiedShow Answer

Airline deregulation has led to: (i) lower prices; (ii) a deterioration of service to isolated communities.

Correct AnswerverifiedShow Answer

Increasing concentration always means an industry has become effectively monopolized.

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

Economies of scale imply: (i) a continuously falling AC curve; (ii) a larger output is more efficient than a smaller output.

Correct AnswerverifiedShow Answer

The Justice Department and the Federal Trade Commission are likely to oppose mergers

Correct AnswerverifiedShow Answer

The government used the Herfindahl-Hirschman index to determine if a proposed merger will lead to excessive concentration.

Correct AnswerverifiedShow Answer

A regulatory agency concerned with "universal service" must

Correct AnswerverifiedShow Answer

Which of the following events would increase the four-firm concentration ratio in a milk industry with six firms?

Correct AnswerverifiedShow Answer

Economists ordinarily favor setting price equal to marginal cost when this option is feasible.

Correct AnswerverifiedShow Answer

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Benefits include the ability to sell a p...
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Mergers can lead to an increase in marke...
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