Question 1

Breaking up a natural monopoly into a number of smaller firms

Accepted Answer

A)  can lower the market price.
B)  decreases competition in the market.
C)  can lower costs.
D)  improves economic efficiency.
E)  does not improve economic efficiency.

Question 2

When a firm uses average total cost pricing,

Accepted Answer

A)  above-normal profits are made.
B)  economic profits equal zero.
C)  there is not enough money to pay investors in the firm their opportunity costs.
D)  price equals marginal cost.
E)  there is not enough money to pay the managers.

Question 3

A massive wave of mergers and consolidations in the United States 100 years ago was made possible by

Accepted Answer

A)  the opening up of the western states.
B)  rapid innovations in transportation,communication,and management techniques.
C)  a massive influx of immigrants from foreign countries.
D)  the growth of the American economy due to international trade.
E)  the growth of toll roads.

Question 4

In accordance with their merger guidelines,the Justice Department and the Federal Trade Commission would probably challenge a merger if the

Accepted Answer

A)  number of firms in the industry were very large.
B)  industry had a Herfindahl-Hirschman index above 800 and the index rose by 80 points or more.
C)  industry had a Herfindahl-Hirschman index above 1,800 and the index rose by 100 points or more.
D)  industry had a Herfindahl-Hirschman index below 1,000.
E)  firms' markets were very large.

Question 5

The U.S.government withdrew its antitrust case against IBM in 1982 because

Accepted Answer

A)  the per se standard did not apply to the case.
B)  IBM agreed to cooperate.
C)  there was no proof that IBM's mainframe computer profits cross-subsidized its personal computer activity.
D)  the Supreme Court redefined the rule of reason to make it more difficult to prove guilt.
E)  competition in computer markets increased rapidly after the case began.

Question 6

According to the Federal Trade Commission merger guidelines,a merger is likely to be challenged if

Accepted Answer

A)  the HHI after the merger is the same as the HHI before the merger.
B)  the HHI decreases after the merger.
C)  the HHI after the merger is above 1,000 and has increased.
D)  the HHI after the merger is above 1,800 and has increased by 50 points or more.
E)  the HHI after the merger is above 1,500 and has decreased.

Question 7

When there are economies of scale in the production of a product,the long-run average total cost curve

Accepted Answer

A)  increases as output increases.
B)  sometimes increases and sometimes decreases as output increases.
C)  does not change as output increases.
D)  declines as output increases.
E)  is horizontal.

Question 8

Draw a diagram for a firm in an industry in which the fixed costs are high and the marginal cost is low and constant.
(A)Would you expect to find many firms in this industry? Explain.
(B)Show that a firm in this industry is not producing efficiently.
(C)In this example,should regulators require this type of firm to produce at the level at which price equals marginal cost? Why? What types of regulation would enable the firm to produce at a more efficient level of output and yet stay viable in the long run?

Accepted Answer

In this industry,the firm will produce a...

Question 9

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

Predatory pricing is the situation in wh...

Question 10

Under incentive regulation,the regulated price is set equal to average total cost.

Accepted Answer

A) True 
 B)False

Question 11

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 12

In the past,the Interstate Commerce Commission (ICC) regulated the trucking industry by

Accepted Answer

A)  putting a floor on the price that trucking companies could charge when shipping goods interstate.
B)  putting a ceiling on the price that trucking companies could charge when shipping goods intrastate.
C)  not allowing one trucking company to haul goods for another trucking company.
D)  limiting the regions that each trucking company could serve.
E)  preventing trucking companies from merging.

Question 13

The measure used by the U.S.government to determine whether a merger should be allowed is the

Accepted Answer

A)  price elasticity of demand.
B)  price-cost margin.
C)  Herfindahl-Hirschman index.
D)  producer price index.
E)  market size.

Question 14

Cable television

Accepted Answer

A)  currently faces competition from telephone companies.
B)  is not competing for viewers who use satellite dishes.
C)  currently faces no competition for its services in the market.
D)  supports the deregulation of the telephone business.
E)  faces competition from over-the-air television channels.

Question 15

The 1986 Supreme Court decision in Matsushita v.Zenith has made predatory pricing more difficult to prove.

Accepted Answer

A) True 
 B)False

Question 16

The government agency that is partially responsible for competition policy in the United States is the

Accepted Answer

A)  Department of Commerce.
B)  Treasury Department.
C)  Congressional Budget Office.
D)  Antitrust Division of the Justice Department.
E)  Federal Reserve System.

Question 17

A regulatory authority might require a monopoly to use marginal cost pricing because marginal cost pricing

Accepted Answer

A)  lowers but does not eliminate deadweight loss to society.
B)  does not change deadweight loss to society.
C)  eliminates any deadweight loss to society.
D)  minimizes the total cost of a natural monopoly.
E)  increases deadweight loss to society.

Question 18

The demand schedule and total costs for a natural monopoly are given in the table below.  (A)Calculate marginal revenue,marginal cost,and average total cost.
(B)Why is this firm a natural monopoly?
(C)Determine the monopoly price and quantity.
(D)Suppose the government decides to regulate this natural monopoly.If the regulators use average cost pricing,what will be the price and quantity of production?
(E)If regulators use marginal cost pricing,what will be the price and quantity of production? What will be profits under marginal cost pricing?

Accepted Answer

(A) <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> (B)This firm is a natural monopoly ...

Question 19

Lawsuits against alleged price fixers can be brought

Accepted Answer

A)  directly by the Justice Department but not by the individual firms harmed by the price fixing.
B)  neither directly by the Justice Department nor by the individual firms harmed by the price fixing.
C)  not directly by the Justice Department but by the individual firms harmed by the price fixing.
D)  directly by the Justice Department and by the individual firms harmed by the price fixing.
E)  by the Justice Department only after they are brought by the individual firms harmed by the price fixing.

Question 20

When regulators become captives of industry,firms and industry workers

Accepted Answer

A)  have a tendency to seek union representation.
B)  receive more than their proportionate share of the regulatory benefits.
C)  take actions to increase benefits to the public.
D)  cannot affect congressional representatives except through the ballot box.
E)  receive short shrift when it comes to sharing the regulatory benefits.

Exam 12: Antitrust Policy and Regulation

Cable television

Correct Answer
verified

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?

Correct Answer
verified
Predatory pricing is the situation in wh...
View Answer

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

Correct Answer
verified

A massive wave of mergers and consolidations in the United States 100 years ago was made possible by

Correct Answer
verified

Breaking up a natural monopoly into a number of smaller firms

Correct Answer
verified

In the past,the Interstate Commerce Commission (ICC) regulated the trucking industry by

Correct Answer
verified

Under incentive regulation,the regulated price is set equal to average total cost.

Correct Answer
verified

In accordance with their merger guidelines,the Justice Department and the Federal Trade Commission would probably challenge a merger if the

Correct Answer
verified

When regulators become captives of industry,firms and industry workers

Correct Answer
verified

The measure used by the U.S.government to determine whether a merger should be allowed is the

Correct Answer
verified

Lawsuits against alleged price fixers can be brought

Correct Answer
verified

When a firm uses average total cost pricing,

Correct Answer
verified

Correct Answer
verified
(A) (B)This firm is a natural monopoly ...
View Answer

Correct Answer
verified
In this industry,the firm will produce a...
View Answer

The U.S.government withdrew its antitrust case against IBM in 1982 because

Correct Answer
verified

The 1986 Supreme Court decision in Matsushita v.Zenith has made predatory pricing more difficult to prove.

Correct Answer
verified

A regulatory authority might require a monopoly to use marginal cost pricing because marginal cost pricing

Correct Answer
verified

According to the Federal Trade Commission merger guidelines,a merger is likely to be challenged if

Correct Answer
verified

When there are economies of scale in the production of a product,the long-run average total cost curve

Correct Answer
verified

The government agency that is partially responsible for competition policy in the United States is the

Correct Answer
verified

Exam 12: Antitrust Policy and Regulation

Cable television

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedPredatory pricing is the situation in wh...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

A massive wave of mergers and consolidations in the United States 100 years ago was made possible by

Correct AnswerverifiedShow Answer

Breaking up a natural monopoly into a number of smaller firms

Correct AnswerverifiedShow Answer

In the past,the Interstate Commerce Commission (ICC) regulated the trucking industry by

Correct AnswerverifiedShow Answer

Under incentive regulation,the regulated price is set equal to average total cost.

Correct AnswerverifiedShow Answer

In accordance with their merger guidelines,the Justice Department and the Federal Trade Commission would probably challenge a merger if the

Correct AnswerverifiedShow Answer

When regulators become captives of industry,firms and industry workers

Correct AnswerverifiedShow Answer

The measure used by the U.S.government to determine whether a merger should be allowed is the

Correct AnswerverifiedShow Answer

Lawsuits against alleged price fixers can be brought

Correct AnswerverifiedShow Answer

When a firm uses average total cost pricing,

Correct AnswerverifiedShow Answer

Correct Answerverified(A) (B)This firm is a natural monopoly ...View AnswerShow Answer

Correct AnswerverifiedIn this industry,the firm will produce a...View AnswerShow Answer

The U.S.government withdrew its antitrust case against IBM in 1982 because

Correct AnswerverifiedShow Answer

The 1986 Supreme Court decision in Matsushita v.Zenith has made predatory pricing more difficult to prove.

Correct AnswerverifiedShow Answer

A regulatory authority might require a monopoly to use marginal cost pricing because marginal cost pricing

Correct AnswerverifiedShow Answer

According to the Federal Trade Commission merger guidelines,a merger is likely to be challenged if

Correct AnswerverifiedShow Answer

When there are economies of scale in the production of a product,the long-run average total cost curve

Correct AnswerverifiedShow Answer

The government agency that is partially responsible for competition policy in the United States is the

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified
Predatory pricing is the situation in wh...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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(A) (B)This firm is a natural monopoly ...
View Answer

Correct Answer
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In this industry,the firm will produce a...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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