ECO 202 Chapter 26 Exam Solution
• Question 1
1 out of 1 points
The Celler-Kefauver Antimerger Act of 1950
Selected Answer: b.
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banned anticompetitive mergers that occurred as a result of one company acquiring the physical assets of another company.
Answers: a.
made interlocking directorates illegal.
b.
banned anticompetitive mergers that occurred as a result of one company acquiring the physical assets of another company.
c.
attempted to decrease the failure rate of small businesses by protecting them from the competition of large and growing chain stores.
d.
both a and b
e.
all of the above
• Question 2
1 out of 1 points
"Exclusive dealing" is
Selected Answer: d.
selling to a retailer on the condition that the retailer not carry any rival products.
Answers: a.
when a union's leadership deals only with the firm's managers and vice versa, so that individual workers cannot "cut their own deal."
b.
a situation in which sellers provide only high-quality, name-brand goods.
c.
selling to a retailer on the condition that the retailer not resell the product to another business.
d.
selling to a retailer on the condition that the retailer not carry any rival products.
• Question 3
1 out of 1 points
Which of the following is not a realistic scenario faced by government regulators of a natural monopoly?
Selected Answer: e.
All of the above are realistic.
Answers: a.
The monopolist may have an incentive to prevent the regulators from learning the true costs of production.
b.
The monopolist may want to give the regulators information on the costs of production but may not have it to give.
c.
The regulators may not care whether the monopolist gives them the true costs of production.
d.
Any cost information that is given to the regulators may be outdated by the time the regulators act on it.
e.
All of the above are realistic.
• Question 4
1 out of 1 points
An "interlocking directorate" is
Selected Answer: a.
an arrangement whereby the directors of one company sit on the board of directors of another company in the same industry.
Answers: a.
an arrangement whereby the directors of one company sit on the board of directors of another company in the same industry.
b.
an arrangement whereby the sale of one product is dependent on the purchase of some other product.
c.
selling to a retailer on the condition that the retailer not carry any rival products.
d.
an arrangement whereby the leaders of a union are also in the top management of the business with which the union is dealing.
• Question 5
1 out of 1 points
The natural monopolist might have an incentive to decrease cost under
Selected Answer: c.
output regulation.
Answers: a.
price regulation.
b.
profit regulation.
c.
output regulation.
d.
a and b
• Question 6
1 out of 1 points
Exhibit 26-40
Refer to Exhibit 26-4. The problem with average-cost pricing regulation is that once it is in place, there is a tendency for the
Selected Answer: a.
ATC curve to shift upward.
Answers: a.
ATC curve to shift upward.
b.
MR curve to shift leftward.
c.
D curve to shift leftward.
d.
ATC curve to shift downward.
e.
D curve to shift rightward.
• Question 7
1 out of 1 points
Which of the following lends support to the capture theory of regulation?
Selected Answer: d.
all of the above
Answers: a.
Persons who have been in the industry will be asked to help regulate the industry.
b.
There will be more people from the regulated industry at a regulatory hearing than people from the general public.
c.
It is in the best interest of an industry that is being regulated to have its personnel develop social relationships with members of the regulatory agency.
d.
all of the above
• Question 8
1 out of 1 points
Regulatory lag refers to
Selected Answer: c.
the time period between when a natural monopoly's costs change and when the regulatory agency adjusts prices for the natural monopoly.
Answers: a.
the fact that most regulated firms are slow to change their structures of production.
b.
the fact that most regulated firms are slow to respond to their customers' preferences.
c.
the time period between when a natural monopoly's costs change and when the regulatory agency adjusts prices for the natural monopoly.
d.
the time period between when natural monopoly begins to produce its output and when it sells its product.
e.
none of the above
• Question 9
1 out of 1 points
The Robinson-Patman Act of 1936
Selected Answer: b.
attempted to decrease the failure rate of small businesses by protecting them from the competition of large and growing chain stores.
Answers: a.
made price discrimination, exclusive dealing, tying contracts, and the acquisition of competing companies' stock illegal when they "substantially lessen competition or tend to create a monopoly."
b.
attempted to decrease the failure rate of small businesses by protecting them from the competition of large and growing chain stores.
c.
declared "unfair methods of competition in commerce" illegal.
d.
banned anticompetitive mergers that occurred as a result of one company acquiring the physical assets of another company.
e.
made conspiracy in the restraint of trade illegal.
• Question 10
1 out of 1 points
The Herfindahl index measures the
Selected Answer: d.
degree of concentration in an industry.
Answers: a.
total market share of the four largest firms worldwide in an industry.
b.
average market share of the firms in an industry.
c.
total market share of the four largest domestic firms in an industry.
d.
degree of concentration in an industry.
e.
degree of competition among the four largest firms in an industry.
• Question 11
1 out of 1 points
Empirical research has shown that immediately upon deregulation of the airline industry,
Selected Answer: c.
airline fares decreased.
Answers: a.
airlines spent less time and money on aircraft maintenance.
b.
airline safety decreased.
c.
airline fares decreased.
d.
all of the above
• Question 12
1 out of 1 points
Exhibit 26-1
Refer to Exhibit 26-1. What price is charged if marginal-cost price regulation is imposed on the natural monopoly firm?
Selected Answer: c.
P1
Answers: a.
a price below P2 and above P1
b.
P2
c.
P1
d.
P3
• Question 13
1 out of 1 points
If I have the only telephone in town, it is essentially worthless. Then other people in town get telephones and I can call them. The value of my telephone rises as more and more of the town installs phones. This makes the telephone a(n) __________ good.
Selected Answer: b.
network
Answers: a.
Internet
b.
network
c.
intermediary
d.
connectivity
• Question 14
1 out of 1 points
Suppose a regulatory agency makes decisions that seem to require an ever-growing agency budget and staff of regulators to monitor firms and enforce the decisions. This would be evidence in support of the __________ theory of regulation.
Selected Answer: c.
public choice
Answers: a.
Stigler
b.
public interest
c.
public choice
d.
capture
• Question 15
1 out of 1 points
"Tying contracts" are
Selected Answer: d.
arrangements whereby the sale of one product is dependent on the purchase of some other product.
Answers: a.
selling to a retailer on the condition that the retailer not resell the product to another business.
b.
agreements between unions and businesses such that when a labor contract is signed, the union and the firm are bound by its terms.
c.
selling to a retailer on the condition that the retailer not carry any rival products.
d.
arrangements whereby the sale of one product is dependent on the purchase of some other product.
• Question 16
1 out of 1 points
Which of the following was declared illegal by the Sherman Act of 1890?
Selected Answer: b.
a conspiracy in restraint of trade
Answers: a.
tying contracts
b.
a conspiracy in restraint of trade
c.
price discrimination
d.
interlocking directorates
• Question 17
1 out of 1 points
The Herfindahl index for a monopoly is 1,000.
Selected Answer: False
Answers: True
False
• Question 18
0 out of 1 points
Exhibit 26-40
Refer to Exhibit 26-4. What is the productive-efficient level of output?
Selected Answer: a.
Q1.
Answers: a.
Q1.
b.
Q3.
c.
Q4.
d.
Q5.
e.
Q2.
• Question 19
1 out of 1 points
The capture theory of regulation holds that
Selected Answer: d.
regardless of the motive for the initial regulation and the establishment of the regulatory agency, eventually the regulatory agency will be "captured" (controlled) by the special interests of the industry that is being regulated.
Answers: a.
whether or not the special interests of the industry that is being regulated will be "captured" (controlled) by the regulatory agency depends on the motive for the initial regulation and the establishment of the regulatory agency.
b.
regardless of the motive for the initial regulation and the establishment of the regulatory agency, eventually the special interests of the industry that is being regulated will be "captured" (controlled) by the regulatory agency.
c.
whether or not the regulatory agency will be "captured" (controlled) by the special interests of the industry depends on the motive for the initial regulation and the establishment of the regulatory agency.
d.
regardless of the motive for the initial regulation and the establishment of the regulatory agency, eventually the regulatory agency will be "captured" (controlled) by the special interests of the industry that is being regulated.
• Question 20
1 out of 1 points
Which of the following statements is false?
Selected Answer: c.
In the Dupont case in 1956, the market relevant to Dupont was ruled to be the cellophane market rather than the flexible wrapping materials market.
Answers: a.
The government eventually dropped its 1969 suit against IBM.
b.
The way a market is defined can have much to say about whether a firm is viewed as a monopoly or not.
c.
In the Dupont case in 1956, the market relevant to Dupont was ruled to be the cellophane market rather than the flexible wrapping materials market.
d.
In 1945, a court ruled that Alcoa was a monopoly.
• Question 21
1 out of 1 points
What is the maximum value of the Herfindahl index?
Selected Answer: d.
10,000
Answers: a.
10
b.
100
c.
1,000
d.
10,000
e.
There is no maximum value of the Herfindahl index.
• Question 22
1 out of 1 points
Which of the following is not a way that natural monopolies are regulated?
Selected Answer: c.
Government regulators determine which patents the monopoly can retain.
Answers: a.
Government regulators determine the price of the product.
b.
Government regulators determine an acceptable profit.
c.
Government regulators determine which patents the monopoly can retain.
d.
Government regulators determine an acceptable output.
• Question 23
1 out of 1 points
The antitrust legislation that declares illegal "unfair methods of competition in commerce" is
Selected Answer: c.
the Federal Trade Commission Act.
Answers: a.
the Robinson-Patman Act.
b.
the Clayton Act.
c.
the Federal Trade Commission Act.
d.
the Sherman Act.
• Question 24
1 out of 1 points
Under profit regulation, a natural monopolist has an incentive to be very careful about minimizing costs.
Selected Answer: False
Answers: True
False
• Question 25
1 out of 1 points
A firm defending itself in an antitrust suit would prefer the market it operates in to be defined _____________, which ______________ the firm's market share compared to what it might be judged otherwise.
Selected Answer: c.
broadly; lowers
Answers: a.
broadly; raises
b.
narrowly; raises
c.
broadly; lowers
d.
narrowly; lowers [Show Less]