Question 1

The average cost curve of a natural monopoly

Accepted Answer

A)   is upward-sloping.
B)   is downward-sloping.
C)   is horizontal.
D)   has an inverted U-shape.
E)   is vertical.F) A) and C)
G) All of the above

Question 2

Predatory pricing interpretations are now well established, and new court rulings are unlikely to change them.

Accepted Answer

A) True 
 B)False

Question 3

There is reason to regulate the prices of firms in industries that

Accepted Answer

A)   are strategically important to the country.
B)   are natural monopolies.
C)   have potential external costs for the country as a whole.
D)   are usually regulated by regulatory authorities.
E)   produce public goods.F) A) and D)
G) A) and C)

Question 4

What is the name of the antitrust case standard that requires a court to consider the rationale for the offending practice and its effect on competition?

Accepted Answer

A)   Rule of reason
B)   Antimonopoly rule
C)   Predatory pricing rule
D)   Per se rule
E)   AntidiscriminationF) B) and C)
G) B) and E)

Question 5

The type of merger that will most likely reduce market competition is a horizontal merger.

Accepted Answer

A) True 
 B)False

Question 6

A firm's action to set a price below its shutdown point with the intent to drive a competitor out of business is called

Accepted Answer

A)   hostile takeover.
B)   lowering the firm's price-cost margin.
C)   predatory pricing.
D)   price discrimination.
E)   a contestable market action.F) B) and C)
G) A) and D)

Question 7

In order to reduce the deadweight loss of a natural monopoly, the government can regulate the price such that it is below marginal cost.

Accepted Answer

A) True 
 B)False

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) B) and C)
G) None of the above

Question 9

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 C)
G) C) and D)

Question 10

A vertical merger will seldom reduce competition if

Accepted Answer

A)   there is exclusive dealing in the market.
B)   the merger occurs at the raw materials stage of production.
C)   there are other firms competing at each level of production.
D)   there is resale price maintenance in the market.
E)   the merged firm competes only in prices.F) C) and D)
G) A) and C)

Question 11

Producers can make regulatory agencies their captives in order to reduce market competition.

Accepted Answer

A) True 
 B)False

Question 12

A 1,000-point change in the Herfindahl-Hirschman index corresponds roughly to a merger of two firms, each with a 7 percent share of the market.

Accepted Answer

A) True 
 B)False

Question 13

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) C) and D)
G) A) and E)

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 E)
G) A) and E)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

The first antitrust law in the United States was the

Accepted Answer

A)   Clayton Antitrust Act.
B)   Sherman Antitrust Act.
C)   Celler-Kefauver Act.
D)   Robinson-Patman Act.
E)   Glass-Steagall Act.F) B) and E)
G) A) and B)

Question 17

Marginal cost pricing is a regulatory method that stipulates that the firm charge a price equal to

Accepted Answer

A)   deadweight loss.
B)   marginal cost.
C)   average cost.
D)   marginal revenue.
E)   fixed cost.F) A) and C)
G) C) and E)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

The government enforces laws against price fixing by

Accepted Answer

A)   putting the alleged price fixers out of business but not confiscating their assets.
B)   regulating prices for a certain period of time.
C)   ordering the alleged price fixers to stop fixing prices.
D)   confiscating the assets of the alleged price fixers.
E)   bringing lawsuits against the alleged price fixers.F) A) and B)
G) A) and C)

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.F) A) and E)
G) All of the above

Exam 12: Antitrust Policy and Regulation

What is the name of the antitrust case standard that requires a court to consider the rationale for the offending practice and its effect on competition?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

There is reason to regulate the prices of firms in industries that

Correct AnswerverifiedShow Answer

The first antitrust law in the United States was the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Marginal cost pricing is a regulatory method that stipulates that the firm charge a price equal to

Correct AnswerverifiedShow Answer

In order to reduce the deadweight loss of a natural monopoly, the government can regulate the price such that it is below marginal cost.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Producers can make regulatory agencies their captives in order to reduce market competition.

Correct AnswerverifiedShow Answer

The average cost curve of a natural monopoly

Correct AnswerverifiedShow Answer

A firm's action to set a price below its shutdown point with the intent to drive a competitor out of business is called

Correct AnswerverifiedShow Answer

The government enforces laws against price fixing by

Correct AnswerverifiedShow Answer

Predatory pricing interpretations are now well established, and new court rulings are unlikely to change them.

Correct AnswerverifiedShow Answer

The type of merger that will most likely reduce market competition is a horizontal merger.

Correct AnswerverifiedShow Answer

A 1,000-point change in the Herfindahl-Hirschman index corresponds roughly to a merger of two firms, each with a 7 percent share of the market.

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

When regulators become captives of industry, firms and industry workers

Correct AnswerverifiedShow Answer

A vertical merger will seldom reduce competition if

Correct AnswerverifiedShow Answer

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