Question 1

Which of the following acts prohibited false advertising?

Accepted Answer

A)  Sherman Act
B)  Clayton Act
C)  Federal Trade Commission Act
D)  Celler-Kefauver Act

Question 2

If there are strong economies of scale and scope, then society

Accepted Answer

A)  can benefit from regulation of a natural monopoly.
B)  can gain when more firms enter the market.
C)  can gain when regulators place a price floor on the market.
D)  should promote the expansion of federally run markets.

Question 3

If the four-firm concentration ratio in an industry increases, the industry

Accepted Answer

A)  must have become more competitive.
B)  must have become a monopoly.
C)  must have become less competitive, although not necessarily a monopoly.
D)  may or may not have become less competitive.

Question 4

If a firm's average cost is declining, setting price equal to marginal cost will

Accepted Answer

A)  maximize the firm's profits.
B)  minimize the firm's losses.
C)  guarantee that the firm will lose money.
D)  help the firm earn the opportunity costs of its resources.

Question 5

On balance, does market power promote or retard technological innovation?

Accepted Answer

The evidence is not clear-cut.While smal...

Question 6

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 7

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 8

Regulation began in the United States in the 1950s.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

Baumol and...

Question 10

A regulatory agency that requires a firm to provide "universal service" must

Accepted Answer

A)  prevent high profits in all markets.
B)  allow the firm to cross-subsidize.
C)  prevent cross-subsidization.
D)  guarantee marginal cost pricing.

Question 11

Distinguish between predatory pricing strategy and bundling strategy.

Accepted Answer

Predatory pricing is pricing that threat...

Question 12

Railroads have received significant attention from regulators because

Accepted Answer

A)  railroads enjoy significant economies of scale.
B)  conditions in the railroad industry are conducive to destructive competition.
C)  regulators would like to ensure universal service to all potential railroad customers.
D)  railroads are vulnerable to predatory pricing.

Question 13

The Herfindahl-Hirschman Index measures

Accepted Answer

A)  concentration in the industry.
B)  industrial average output.
C)  economies of scale.
D)  consumer confidence.

Question 14

Deregulation of the airline and trucking industries was followed by the creation of many new firms.

Accepted Answer

A) True 
 B)False

Question 15

When firms have had to defend themselves against the charge that they have adopted unjustifiably low prices either to drive a competitor out of business or to prevent the entry of a rival, they have been accused of

Accepted Answer

A)  creating a trust.
B)  conspiracy.
C)  predatory pricing.
D)  price discrimination.

Question 16

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 17

Before the breakup of AT&T several years ago, profits on long-distance calls offset losses on basic residential service.This practice is known as

Accepted Answer

A)  abuse of monopolistic power.
B)  cream skimming.
C)  cross-subsidization.
D)  the Ramsey rule.

Question 18

Market power allows firms to raise prices significantly above the competitive level.

Accepted Answer

A) True 
 B)False

Question 19

The share of industry output sold by the top four steel producers in the country are 19 percent, 15 percent, 12 percent, and 9 percent, 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 20

The prices that are in the public's best interest will

Accepted Answer

A)  always allow the regulated firm to break even.
B)  always allow the regulated firm to make positive economic profits.
C)  sometimes leave the regulated firm with economic losses.
D)  leave the regulated firm with profits that are about 10 percent higher than those of other firms.

Exam 14: Limiting Market Power: Antitrust and Regulation

Distinguish between predatory pricing strategy and bundling strategy.

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

Before the breakup of AT&T several years ago, profits on long-distance calls offset losses on basic residential service.This practice is known as

Correct AnswerverifiedShow Answer

Railroads have received significant attention from regulators because

Correct AnswerverifiedShow Answer

When firms have had to defend themselves against the charge that they have adopted unjustifiably low prices either to drive a competitor out of business or to prevent the entry of a rival, they have been accused of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow 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

On balance, does market power promote or retard technological innovation?

Correct AnswerverifiedThe evidence is not clear-cut.While smal...View AnswerShow Answer

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

Correct AnswerverifiedBaumol and...View AnswerShow Answer

Deregulation of the airline and trucking industries was followed by the creation of many new firms.

Correct AnswerverifiedShow Answer

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 Herfindahl-Hirschman Index measures

Correct AnswerverifiedShow Answer

If a firm's average cost is declining, setting price equal to marginal cost will

Correct AnswerverifiedShow Answer

A regulatory agency that requires a firm to provide "universal service" must

Correct AnswerverifiedShow Answer

If there are strong economies of scale and scope, then society

Correct AnswerverifiedShow Answer

The prices that are in the public's best interest will

Correct AnswerverifiedShow Answer

If the four-firm concentration ratio in an industry increases, the industry

Correct AnswerverifiedShow Answer

Regulation began in the United States in the 1950s.

Correct AnswerverifiedShow Answer

Which of the following acts prohibited false advertising?

Correct AnswerverifiedShow Answer

Market power allows firms to raise prices significantly above the competitive level.

Correct AnswerverifiedShow Answer

What is not a limitation of antitrust legislation?

Correct AnswerverifiedShow Answer

Correct Answer
verified
Predatory pricing is pricing that threat...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Marginal cost is the correct cost to use...
View Answer

Correct Answer
verified
The evidence is not clear-cut.While smal...
View Answer

Correct Answer
verified
Baumol and...
View Answer

Correct Answer
verified

Correct Answer
verified
Benefits include the ability to sell a p...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified