Question 1

Regulation of a natural monopoly firm would mean society would see

Accepted Answer

A)  sometimes more and sometimes less deadweight loss.
B)  the same deadweight loss.
C)  more deadweight loss.
D)  less deadweight loss.
E)  zero deadweight loss.F) A) and B)
G) A) and C)

Question 2

Price fixing is the practice of charging the same price for a product to all customers.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

The Herfindahl-Hirschman index is a measure of

Accepted Answer

A)  market size.
B)  firm size.
C)  the degree of firm responsiveness to a change in demand.
D)  the degree of concentration in a market.
E)  the degree of collusion among firms in a market.F) None of the above
G) A) and E)

Question 5

One of the most famous price-fixing cases in U.S. history occurred in the 1950s and involved

Accepted Answer

A)  Alcoa and Reynolds Aluminum Company.
B)  General Motors and Ford.
C)  Westinghouse and General Electric.
D)  IBM and Digital Equipment Company.
E)  American Airlines and United Airlines.F) A) and B)
G) A) and C)

Question 6

Should the government try to prevent a merger that would enable the resultant firm to produce at a more efficient scale of production?

Accepted Answer

Though a horizontal merger may enable ou...

Question 7

An incentive-regulated firm can mislead the regulator by

Accepted Answer

A)  saying that its marginal cost is lower than it actually is, in order to get a higher price.
B)  asking to charge the marginal cost price.
C)  hiring the best lawyers to lobby the regulator.
D)  saying that its average total cost is higher than it actually is, in order to get a higher price.
E)  asking to charge the average cost price.F) A) and B)
G) A) and E)

Question 8

The combining of two firms, one of which supplies goods to the other, is called a

Accepted Answer

A)  conglomerate merger.
B)  horizontal merger.
C)  competitive merger.
D)  cartel.
E)  vertical merger.F) C) and D)
G) B) and E)

Question 9

A downward-sloping demand curve that incorporates the firm's expectations of what other firms will do is called a

Accepted Answer

A)  compensated demand curve.
B)  independent demand curve.
C)  uncompensated demand curve.
D)  consumer's demand curve.
E)  strategic demand curve.F) A) and B)
G) None of the above

Question 10

A contract condition whereby a manufacturer does not allow a retailer to sell goods made by a competing manufacturer is called

Accepted Answer

A)  uncontested trading.
B)  boycott dealing.
C)  market fixing.
D)  exclusive dealing.
E)  resale price maintenance.F) D) and E)
G) C) and E)

Question 11

Antitrust policy began in the United States just over 100 years ago in response to

Accepted Answer

A)  predatory pricing on the part of small retailers.
B)  a massive breaking up of existing firms.
C)  massive waves of immigration into the country.
D)  the development of contestable markets.
E)  a massive wave of mergers and consolidations among firms.F) None of the above
G) B) and D)

Question 12

The Federal Trade Commission is likely to challenge a merger in an industry with

Accepted Answer

A)  a low price-cost margin because it reflects firm inefficiency.
B)  a high price-cost margin because it reflects firm inefficiency.
C)  a low price-cost margin because it reflects high market power.
D)  a high price-cost margin because it reflects high market power.
E)  a negative price-cost margin because it reflects poor industry performance.F) C) and E)
G) All of the above

Question 13

If an industry is a natural monopoly, then for a given output level the average total cost of two individual firms in the industry is higher than the average total cost of one firm.

Accepted Answer

A) True 
 B)False

Question 14

Under incentive regulation, if a regulated natural monopoly achieves average total cost lower than the regulated price, it can

Accepted Answer

A)  trade the extra profits for other regulatory leniencies.
B)  be exposed to a higher tax.
C)  decrease its output.
D)  keep the extra profits.
E)  increase its output.F) B) and D)
G) A) and E)

Question 15

Restraints on trade may do all the following except

Accepted Answer

A)  decrease the quantity produced.
B)  decrease profits.
C)  cause a deadweight loss.
D)  raise prices.
E)  limit other firms' access to a market.F) A) and B)
G) D) and E)

Question 16

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.F) A) and D)
G) B) and D)

Question 17

Allowing a natural monopoly to exist is more efficient than breaking it into several smaller firms.

Accepted Answer

A) True 
 B)False

Question 18

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.F) B) and C)
G) A) and E)

Question 19

When a firm's average total cost curve is downward-sloping,

Accepted Answer

A)  one firm can charge a higher price than multiple firms.
B)  one firm can always produce more cheaply than multiple firms.
C)  multiple firms in a market can charge a lower price than one firm.
D)  a larger number of firms in a market is better than a smaller number of firms.
E)  multiple firms can produce more cheaply than one firm.F) A) and B)
G) A) and C)

Question 20

Price fixing is illegal under the per se rule outlined in Section 1 of the Sherman Act.

Accepted Answer

A) True 
 B)False

Exam 12: Antitrust Policy and Regulation

Price fixing is illegal under the per se rule outlined in Section 1 of the Sherman Act.

Correct AnswerverifiedShow Answer

If an industry is a natural monopoly, then for a given output level the average total cost of two individual firms in the industry is higher than the average total cost of one firm.

Correct AnswerverifiedShow Answer

A downward-sloping demand curve that incorporates the firm's expectations of what other firms will do is called a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Allowing a natural monopoly to exist is more efficient than breaking it into several smaller firms.

Correct AnswerverifiedShow Answer

Regulation of a natural monopoly firm would mean society would see

Correct AnswerverifiedShow Answer

One of the most famous price-fixing cases in U.S. history occurred in the 1950s and involved

Correct AnswerverifiedShow Answer

An incentive-regulated firm can mislead the regulator by

Correct AnswerverifiedShow Answer

Antitrust policy began in the United States just over 100 years ago in response to

Correct AnswerverifiedShow Answer

When a firm's average total cost curve is downward-sloping,

Correct AnswerverifiedShow Answer

Should the government try to prevent a merger that would enable the resultant firm to produce at a more efficient scale of production?

Correct AnswerverifiedThough a horizontal merger may enable ou...View AnswerShow Answer

Under incentive regulation, if a regulated natural monopoly achieves average total cost lower than the regulated price, it can

Correct AnswerverifiedShow Answer

The Herfindahl-Hirschman index is a measure of

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

Price fixing is the practice of charging the same price for a product to all customers.

Correct AnswerverifiedShow Answer

A contract condition whereby a manufacturer does not allow a retailer to sell goods made by a competing manufacturer is called

Correct AnswerverifiedShow Answer

Restraints on trade may do all the following except

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 Federal Trade Commission is likely to challenge a merger in an industry with

Correct AnswerverifiedShow Answer

The combining of two firms, one of which supplies goods to the other, is called a

Correct AnswerverifiedShow Answer

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Though a horizontal merger may enable ou...
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