Assignment 10

Question 1 (1 point)
Which of the following is not true about antitrust policy in the United States?
  1. Antitrust policy is governed by the Sherman, Clayton, and Federal Trade Commission acts
  2. Antitrust policy prohibits large firms from colluding to fix prices
  3. Antitrust policy limits what large firms, or corporations, can do
  4. The laws that define the government's approach to antitrust policy are designed to limit the creation and behavior of trusts
  5. 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
  1. stipulates that a firm should follow a reasonable pricing policy
  2. focuses on the intent and conduct of firms with respect to competition
  3. has been applied only to a single Supreme Court case
  4. protects consumers against false advertising
  5. 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?
  1. Quantity fixing
  2. Predatory pricing
  3. Monopoly pricing
  4. Price fixing
  5. Price discrimination
Question 4 (1 point)
A market that is shared equally by 100 firms would have a Herfindahl index of
  1. 50
  2. 1
  3. 1,000
  4. 100
  5. Cannot be determined from the information provided
Question 5 (1 point)
The Herfindahl index
  1. is a measure of market concentration that focuses on the six largest firms in an industry
  2. ranges in value from �100,000 to +100,000
  3. identifies the extent to which an industry has grown internally as opposed to externally
  4. is based on the price elasticities of demand facing firms in an industry
  5. 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?
  1. The only activity that antitrust policy attempts to control in the United States is restraint of trade
  2. Antitrust policy is not as strict in the United States as it is in other nations
  3. In the United States, antitrust policy does not attempt to control mergers or supplier relationships
  4. Antitrust policy is stricter in the United States than it is in other nations
  5. 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
  1. competition can be enhanced
  2. price and output are more beneficial for consumers than would be the case without government interference
  3. the monopolist does not try to expand internationally
  4. the monopolist does not oversupply the market
  5. 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?
  1. 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
  2. Social regulation is concerned with directly redistributing wealth
  3. Economic regulation and social regulation have exactly the same goals
  4. Economic regulation has little to do with price and output
  5. 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,
  1. this is known as allowing a fair rate of return
  2. the firm earns a normal profit
  3. the firm produces an inefficiently small level of output
  4. the firm operates where the demand curve intersects the average-total-cost curve
  5. All of these
Question 10 (1 point)
One favorable result of deregulation from the consumer's viewpoint is that
  1. although consumers pay a higher price, they receive a larger quantity
  2. the resulting price competition among firms should result in lower prices
  3. as non-price competition develops due to deregulation, consumers receive a larger quantity of the good
  4. firms are more accountable to the government for what they produce
  5. safety standards always improve as competition among firms develops
Question 11 (1 point)
One potential example of the success of deregulation is
  1. increased electricity outages
  2. the saving and loan crisis of the 1980s
  3. that the airline industry has become safer
  4. lower long-distance telephone charges
  5. 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
  1. sunk assets
  2. stranded assets
  3. nonreturnable assets
  4. market assets
  5. monopoly assets
Question 13 (1 point)
Which of the following agencies is not concerned with social regulation?
  1. Food and Drug Administration (FDA)
  2. Drug Enforcement Administration (DEA)
  3. Environmental Protection Agency (EPA)
  4. Occupational Safety and Health Administration (OSHA)
  5. Consumer Products Safety Commission (CPSC)
Question 14 (1 point)
Which of the following statements about social regulation is not true?
  1. There are enormous costs and benefits to social regulation
  2. Many economists contend that the cost-benefit test for regulation should include the opportunity costs implied by interfering with the free market
  3. The government should regulate industry whenever the benefits of regulation exceed the costs.
  4. The cost-benefit test for regulation would expand regulations designed to benefit a very few at the cost of many
  5. 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
  1. privatizing industries
  2. awaiting the outcome
  3. regulating industries
  4. nationalizing industries
  5. reregulating industries
Question 16 (1 point)
GATT, the General Agreement on Tariffs and Trade,
  1. was a global trade agreement to raise tariffs
  2. was the first global trade agreement that followed World War II
  3. was the global trade agreement that did away with the gold standard
  4. is now called the World Agreement on Trade and Tariffs
  5. 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
  1. regulate the financial activities of public companies
  2. regulate exchange where barter trades are dominant
  3. regulate the loans and deposits of financial institutions
  4. to protect public companies from fraudulent investors
  5. 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,
  1. public companies never have the incentive to hide information from the SEC
  2. it must rely on the work of auditors, investment bankers, and others
  3. the findings of the SEC can never be trusted
  4. conservative politicians always argue for increases in the SEC budget
  5. 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
  1. lending money to Enron at exorbitantly low interest rates
  2. helping to design Enron's hidden partnerships
  3. owning shares of Enron stock while its analysts were recommending that the general public buy shares of Enron stock
  4. All of these
  5. Both b. and c
Question 20 (1 point)
The Sarbanes-Oxley Act
  1. was passed in response to Enron and other accounting scandals
  2. attempts to avoid conflicts of interest by separating auditing and consulting functions
  3. was adopted by Congress in 2002
  4. requires that CEOs sign a statement verifying the accuracy of financial statements
  5. 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?
Citation: admin. (2009, January 27). Assignment 10. Retrieved January 07, 2011, from Free Online Course Materials — USU OpenCourseWare Web site:
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