Assignment 10

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Question 1 (1 point)

Which of the following is not true about antitrust policy in the United States?

Antitrust policy is governed by the Sherman, Clayton, and Federal Trade Commission acts
Antitrust policy prohibits large firms from colluding to fix prices
Antitrust policy limits what large firms, or corporations, can do
The laws that define the government's approach to antitrust policy are designed to limit the creation and behavior of trusts
Antitrust policy stops large firms from merging unless the resulting firm would have a large influence on the domestic and international markets

Question 2 (1 point)

The "rule of reason" in antitrust

stipulates that a firm should follow a reasonable pricing policy
focuses on the intent and conduct of firms with respect to competition
has been applied only to a single Supreme Court case
protects consumers against false advertising
assures the existence of a reasonable number of firms in an industry

Question 3 (1 point)

Which of the following is by definition illegal, according to the text?

Quantity fixing
Predatory pricing
Monopoly pricing
Price fixing
Price discrimination

Question 4 (1 point)

A market that is shared equally by 100 firms would have a Herfindahl index of

50
1
1,000
100
Cannot be determined from the information provided

Question 5 (1 point)

The Herfindahl index

is a measure of market concentration that focuses on the six largest firms in an industry
ranges in value from �100,000 to +100,000
identifies the extent to which an industry has grown internally as opposed to externally
is based on the price elasticities of demand facing firms in an industry
is a measure of market concentration that includes all firms in an industry

Question 6 (1 point)

Which of the following statements best represents antitrust policy in the United States?

The only activity that antitrust policy attempts to control in the United States is restraint of trade
Antitrust policy is not as strict in the United States as it is in other nations
In the United States, antitrust policy does not attempt to control mergers or supplier relationships
Antitrust policy is stricter in the United States than it is in other nations
In the United States, antitrust policy does not attempt to control pricing or advertising

Question 7 (1 point)

In the case of a natural monopoly where cost conditions lead to a sole supplier, regulation is used to ensure that

competition can be enhanced
price and output are more beneficial for consumers than would be the case without government interference
the monopolist does not try to expand internationally
the monopolist does not oversupply the market
the monopolist does not attempt to further increase market share

Question 8 (1 point)

Which of the following statements best describes the difference between economic regulation and social regulation?

Economic regulation is concerned with price and output for a specific industry whereas social regulation is concerned with health and safety matters that apply across several industries
Social regulation is concerned with directly redistributing wealth
Economic regulation and social regulation have exactly the same goals
Economic regulation has little to do with price and output
Social regulation has historically targeted industries such as railroads and airlines

Question 9 (1 point)

When regulators require that a natural monopoly sets price equal to average total cost,

this is known as allowing a fair rate of return
the firm earns a normal profit
the firm produces an inefficiently small level of output
the firm operates where the demand curve intersects the average-total-cost curve
All of these

Question 10 (1 point)

One favorable result of deregulation from the consumer's viewpoint is that

although consumers pay a higher price, they receive a larger quantity
the resulting price competition among firms should result in lower prices
as non-price competition develops due to deregulation, consumers receive a larger quantity of the good
firms are more accountable to the government for what they produce
safety standards always improve as competition among firms develops

Question 11 (1 point)

One potential example of the success of deregulation is

increased electricity outages
the saving and loan crisis of the 1980s
that the airline industry has become safer
lower long-distance telephone charges
more trucking accidents

Question 12 (1 point)

If a market becomes deregulated and is forced from monopoly to competition, the monopolist may be stuck with costly assets for which no returns are possible. These assets are known as

sunk assets
stranded assets
nonreturnable assets
market assets
monopoly assets

Question 13 (1 point)

Which of the following agencies is not concerned with social regulation?

Food and Drug Administration (FDA)
Drug Enforcement Administration (DEA)
Environmental Protection Agency (EPA)
Occupational Safety and Health Administration (OSHA)
Consumer Products Safety Commission (CPSC)

Question 14 (1 point)

Which of the following statements about social regulation is not true?

There are enormous costs and benefits to social regulation
Many economists contend that the cost-benefit test for regulation should include the opportunity costs implied by interfering with the free market
The government should regulate industry whenever the benefits of regulation exceed the costs.
The cost-benefit test for regulation would expand regulations designed to benefit a very few at the cost of many
Some economists argue that any regulation costing more than $10 million per life saved should not be implemented

Question 15 (1 point)

While the United States was deregulating industries, the rest of the world was

privatizing industries
awaiting the outcome
regulating industries
nationalizing industries
reregulating industries

Question 16 (1 point)

GATT, the General Agreement on Tariffs and Trade,

was a global trade agreement to raise tariffs
was the first global trade agreement that followed World War II
was the global trade agreement that did away with the gold standard
is now called the World Agreement on Trade and Tariffs
was a United States policy to raise tariffs on imported sugar

Question 17 (1 point)

The purpose of the Securities and Exchange Commission is to

regulate the financial activities of public companies
regulate exchange where barter trades are dominant
regulate the loans and deposits of financial institutions
to protect public companies from fraudulent investors
All of these

Question 18 (1 point)

Since the SEC does not have the resources to examine every document that it requires from public companies,

public companies never have the incentive to hide information from the SEC
it must rely on the work of auditors, investment bankers, and others
the findings of the SEC can never be trusted
conservative politicians always argue for increases in the SEC budget
polls show that the public favors the elimination of the SEC

Question 19 (1 point)

Investment banks helped to contribute to the Enron scandal by

lending money to Enron at exorbitantly low interest rates
helping to design Enron's hidden partnerships
owning shares of Enron stock while its analysts were recommending that the general public buy shares of Enron stock
All of these
Both b. and c

Question 20 (1 point)

The Sarbanes-Oxley Act

was passed in response to Enron and other accounting scandals
attempts to avoid conflicts of interest by separating auditing and consulting functions
was adopted by Congress in 2002
requires that CEOs sign a statement verifying the accuracy of financial statements
All of these

Question 1 (5.00 points)

What is the difference between economic regulation and social regulation?

Question 2 (5.00 points)

Some airline executives have called for re-regulation. Why might an executive of an airline prefer to operate under a regulated environment?

Copyright 2008, by the Contributing Authors. Cite/attribute Resource. admin. (2006, July 03). Assignment 10. Retrieved August 30, 2008, from Free Online Course Materials — USU OpenCourseWare Web site: http://ocw.usu.edu/Economics/Introduction_to_Microeconomics/assignment10.htm. This work is licensed under a Creative Commons License.

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