question
From 1992 to 2012, many industries have increased in concentration.
answer
t
question
The government used the Herfindahl-Hirschman index to determine if a proposed merger will lead to excessive concentration.
answer
t
question
If a firm is a natural monopoly, society will benefit if it is broken into several small companies.
answer
f
question
Firms violating antitrust laws are likely to be sued by the federal government, but not by rival firms.
answer
f
question
The Clayton Act prohibits "all contracts, combinations and conspiracies in restraint of trade."
answer
f
question
____ occur(s) when an X percent increase in input use raises output by more than X percent, so that the more the firm produces, the lower its per-unit costs become.
a.
Economies of scope
b.
Scale economies
c.
Perfect competition
d.
Product differentiation
a.
Economies of scope
b.
Scale economies
c.
Perfect competition
d.
Product differentiation
answer
b.
Scale economies
Scale economies
question
Which statement about market power is incorrect?
a.
It can lead to inefficient production and the lack of innovation.
b.
It can lead to resource misallocation.
c.
Monopoly power can lead to decreases in producer surplus.
d.
It can lead to price increases that exploit consumers.
a.
It can lead to inefficient production and the lack of innovation.
b.
It can lead to resource misallocation.
c.
Monopoly power can lead to decreases in producer surplus.
d.
It can lead to price increases that exploit consumers.
answer
c.
Monopoly power can lead to decreases in producer surplus.
Monopoly power can lead to decreases in producer surplus.
question
Policies that preclude the deliberate creation of monopoly and undesirable practices are called
a.
antimonopoly policies.
b.
socialism.
c.
anticompetitive policies.
d.
antitrust policies.
a.
antimonopoly policies.
b.
socialism.
c.
anticompetitive policies.
d.
antitrust policies.
answer
d.
antitrust policies.
antitrust policies.
question
The four-firm concentration ratio for an industry is
a.
the share of industry output sold by the four largest firms in the industry.
b.
the percentage of total industry profits claimed by the four largest firms.
c.
the share of industry output sold by the fourth largest firm in the industry.
d.
the number of firms in the industry, divided by four.
a.
the share of industry output sold by the four largest firms in the industry.
b.
the percentage of total industry profits claimed by the four largest firms.
c.
the share of industry output sold by the fourth largest firm in the industry.
d.
the number of firms in the industry, divided by four.
answer
a.
the share of industry output sold by the four largest firms in the industry.
the share of industry output sold by the four largest firms in the industry.
question
If the automobile industry has become highly concentrated and cartelized. To maintain profits, firms may
a.
prevent entry.
b.
become price takers.
c.
lower prices to raise revenues.
d.
allow newcomers to favorably enter the market.
a.
prevent entry.
b.
become price takers.
c.
lower prices to raise revenues.
d.
allow newcomers to favorably enter the market.
answer
a.
prevent entry.
prevent entry.
question
If the four-firm concentration ratio in an industry increases, the industry
a.
must have become less competitive, although not necessarily a monopoly.
b.
may or may not have become less competitive.
c.
must have become more competitive.
d.
must have become a monopoly.
a.
must have become less competitive, although not necessarily a monopoly.
b.
may or may not have become less competitive.
c.
must have become more competitive.
d.
must have become a monopoly.
answer
b.
may or may not have become less competitive.
may or may not have become less competitive.
question
Which of the following would not lead to higher concentration in an industry?
a.
A large number of firms have entered the market.
b.
Some firms have become technologically superior.
c.
Innovation increases plant size of some firms and lowered their average costs.
d.
Larger firms gain control of important resources, squeezing out smaller firms.
a.
A large number of firms have entered the market.
b.
Some firms have become technologically superior.
c.
Innovation increases plant size of some firms and lowered their average costs.
d.
Larger firms gain control of important resources, squeezing out smaller firms.
answer
a.
A large number of firms have entered the market.
A large number of firms have entered the market.
question
A home appliances supplier offers substantial discounts to customers if they buy several of the firm's products. When bought together, these items cost considerably less than the sum of the prices of the items if they were bought separately. Which pricing arrangement is being discussed here?
a.
Tacit collusion
b.
Price dealing
c.
Skimming
d.
Bundling
a.
Tacit collusion
b.
Price dealing
c.
Skimming
d.
Bundling
answer
d.
Bundling
Bundling
question
The Justice Department and the Federal Trade Commission are likely to oppose mergers
a.
which will help one of the merging firms out of financial difficulties.
b.
that seem likely to increase efficiency.
c.
that create a larger firm with economies of scale in a contestable market.
d.
which threaten to reduce competition
a.
which will help one of the merging firms out of financial difficulties.
b.
that seem likely to increase efficiency.
c.
that create a larger firm with economies of scale in a contestable market.
d.
which threaten to reduce competition
answer
d.
which threaten to reduce competition
which threaten to reduce competition
question
Unions typically ____ deregulation because it generally makes pricing ____ competitive.
a.
oppose; less
b.
support; more
c.
oppose; more
d.
support; less
a.
oppose; less
b.
support; more
c.
oppose; more
d.
support; less
answer
c.
oppose; more
oppose; more
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