Question 1

If a monopolist is forced to set price equal to average total cost, economic profit

Accepted Answer

A)   will be negative, and the monopolist may go out of business
B)   will be zero
C)   will be positive
D)   will be negative, and the firm will stay in business if there are significant fixed costs
E)   may be positive, negative, or zero

Question 2

If the value of the Herfindahl index is 10,000, there must be exactly one firm in the industry.

Accepted Answer

A) True 
 B)False

Question 3

U.S. manufacturers formed trusts in the late 1880s because

Accepted Answer

A)   booms in the economy made trusts highly profitable and allowed them to expand
B)   economies of scale allowed larger firms to prosper
C)   the rapid growth of the railroads allowed firms to reach a wider market
D)   technological breakthroughs increased capital use and optimal firm size
E)   they wanted to avoid price wars during depressions

Question 4

A natural monopoly exists when, throughout the range of market demand,

Accepted Answer

A)   average cost is increasing
B)   there are diseconomies of scale
C)   there are economies of scale
D)   average cost is constant
E)   marginal cost exceeds average cost

Question 5

A monopoly is likely to charge a higher price than an otherwise similar competitive industry would be.

Accepted Answer

A) True 
 B)False

Question 6

NARRBEGIN: Exhibit 15-1-2
Exhibit 15-5
 
-If the natural monopoly in Exhibit 15-5 is regulated so that it earns a normal profit, then

Accepted Answer

A)   P = $24 and Q = 8
B)   P = $22 and Q = 6
C)   P = $24 and Q = 5
D)   P = $20 and Q = 8
E)   P = $18 and Q = 5

Question 7

The capture theory of regulation, espoused by George Stigler, asserts that

Accepted Answer

A)   consumers "capture" regulatory agencies so that regulation favors consumers
B)   producers "capture" regulatory agencies so that regulation favors producers
C)   regulators "capture" producers and limit their market power
D)   consumers "capture" some consumer surplus lost to monopoly
E)   consumers and producers work together to "capture" regulatory agencies in order to achieve more desirable regulation

Question 8

In 1998 the US Justice Department and 20 state attorneys general filed a suit against Microsoft alleging that Microsoft tried to protect its operating system monopoly and extend that monopoly into internet software. This is an example of

Accepted Answer

A)   predatory pricing
B)   antitrust enforcement
C)   economic regulation
D)   social regulation
E)   the regulatory dilemma

Question 9

Individuals serving on the boards of directors of competing firms is called

Accepted Answer

A)   interlocking directorates
B)   tying contracts
C)   the rule of reason
D)   exclusive dealing
E)   predatory pricing

Question 10

According to William Shepherd's examination of competitive trends in the U.S. economy, a tight oligopoly

Accepted Answer

A)   is a single firm that controls the entire market and can block entry
B)   is an industry in which the top four firms supply more than 60 percent of the market, have stable market shares, and cooperate with each other
C)   is an industry in which the top four firms supply more than 60 percent of the market, have unstable market shares, and do not cooperate with each other
D)   is an industry in which a single firm has over half the market share and no close rival
E)   is an industry in which a single firm has over one-third of the entire market, the market share is stable, and the firm cooperates with other firms in the industry

Question 11

NARRBEGIN: Exhibit 15-2
Exhibit 15-4
 
-In Exhibit 15-4, the consumer surplus that results from a regulated monopoly that charges a price equal to MC, is shown by area

Accepted Answer

A)   abc
B)   adf
C)   cef
D)   dfeg
E)   bcfd

Question 12

NARRBEGIN: Exhibit 15-2
Exhibit 15-4
 
-In Exhibit 15-4, the consumer surplus that results from an unregulated monopoly, is shown by area

Accepted Answer

A)   abc
B)   adf
C)   cef
D)   dfeg
E)   bcfd

Question 13

Under U.S. antitrust law, a consent decree allows a firm to

Accepted Answer

A)   admit to an antitrust violation without penalty
B)   admit to an antitrust violation without a lawsuit
C)   challenge the government's accusation in court
D)   cease the alleged wrongdoing without admitting guilt
E)   cease the alleged wrongdoing only by admitting guilt

Question 14

Economic regulation of business is justified if, by intervening, government can

Accepted Answer

A)   improve the allocation of resources in society
B)   create economic rents for special interest groups
C)   reduce output and increase prices for an industry
D)   increase tax revenue from the regulated industry
E)   force firms to increase their costs of production

Question 15

Ersatz Kreme will sell its filling to Hunky Donuts only if Hunky Donuts agrees not to buy filling from other suppliers. This is an example of

Accepted Answer

A)   price discrimination
B)   exclusive dealing
C)   a tying contract
D)   interlocking directorates
E)   a trust

Question 16

If the government wishes to provide a natural monopolist with a "fair" rate of return, it will force the firm to set

Accepted Answer

A)   P = MC
B)   P = AC
C)   P = MR
D)   P = AVC
E)   MR = MC

Question 17

According to William Shepherd, the total assets of the top 100 firms in the United States have been declining, mostly in response to increased imports.

Accepted Answer

A) True 
 B)False

Question 18

When ruling on a price-fixing case under the per se rule, the U.S. courts need only examine

Accepted Answer

A)   market structure
B)   market conduct
C)   market performance
D)   market structure and conduct
E)   market structure, conduct, and performance

Question 19

As imports rose in 13 major industries studied by Shepherd, these U.S. producers, finding themselves at a cost and quality disadvantage relative to imported goods, initially responded by

Accepted Answer

A)   improving technology
B)   exiting the industry
C)   seeking trade barriers
D)   asking that quotas and tariffs be removed
E)   raising prices to recoup their losses

Question 20

The Sherman Act

Accepted Answer

A)   created the Federal Trade Commission
B)   established the Department of Justice Guidelines
C)   regulated railroad and trucking industries
D)   outlawed restraints of trade
E)   forbade price discrimination

Exam 15: Economic Regulation and Antitrust Policy

When ruling on a price-fixing case under the per se rule, the U.S. courts need only examine

Correct AnswerverifiedShow Answer

Ersatz Kreme will sell its filling to Hunky Donuts only if Hunky Donuts agrees not to buy filling from other suppliers. This is an example of

Correct AnswerverifiedShow Answer

A natural monopoly exists when, throughout the range of market demand,

Correct AnswerverifiedShow Answer

NARRBEGIN: Exhibit 15-2 Exhibit 15-4 -In Exhibit 15-4, the consumer surplus that results from a regulated monopoly that charges a price equal to MC, is shown by area

Correct AnswerverifiedShow Answer

If a monopolist is forced to set price equal to average total cost, economic profit

Correct AnswerverifiedShow Answer

NARRBEGIN: Exhibit 15-2 Exhibit 15-4 -In Exhibit 15-4, the consumer surplus that results from an unregulated monopoly, is shown by area

Correct AnswerverifiedShow Answer

The capture theory of regulation, espoused by George Stigler, asserts that

Correct AnswerverifiedShow Answer

If the value of the Herfindahl index is 10,000, there must be exactly one firm in the industry.

Correct AnswerverifiedShow Answer

A monopoly is likely to charge a higher price than an otherwise similar competitive industry would be.

Correct AnswerverifiedShow Answer

According to William Shepherd, the total assets of the top 100 firms in the United States have been declining, mostly in response to increased imports.

Correct AnswerverifiedShow Answer

In 1998 the US Justice Department and 20 state attorneys general filed a suit against Microsoft alleging that Microsoft tried to protect its operating system monopoly and extend that monopoly into internet software. This is an example of

Correct AnswerverifiedShow Answer

According to William Shepherd's examination of competitive trends in the U.S. economy, a tight oligopoly

Correct AnswerverifiedShow Answer

NARRBEGIN: Exhibit 15-1-2 Exhibit 15-5 -If the natural monopoly in Exhibit 15-5 is regulated so that it earns a normal profit, then

Correct AnswerverifiedShow Answer

Economic regulation of business is justified if, by intervening, government can

Correct AnswerverifiedShow Answer

U.S. manufacturers formed trusts in the late 1880s because

Correct AnswerverifiedShow Answer

If the government wishes to provide a natural monopolist with a "fair" rate of return, it will force the firm to set

Correct AnswerverifiedShow Answer

The Sherman Act

Correct AnswerverifiedShow Answer

Individuals serving on the boards of directors of competing firms is called

Correct AnswerverifiedShow Answer

As imports rose in 13 major industries studied by Shepherd, these U.S. producers, finding themselves at a cost and quality disadvantage relative to imported goods, initially responded by

Correct AnswerverifiedShow Answer

Under U.S. antitrust law, a consent decree allows a firm to

Correct AnswerverifiedShow 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

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