Econ 212 Exam 3 Prep - 2020

ldc have _____ of the worlds population

3/4

conglomerate merger

A conglomerate merger is a merger between firms that are involved in totally unrelated business activities.

Trust

A group of corporations run by a single board of directors

horizontal merger

A horizontal merger is a merger or business consolidation that occurs between firms that operate in the same industry. Competition tends to be higher among companies operating in the same space, meaning synergies and potential gains in market share are much greater for merging firms

effluent tax

A tax on the pollutant to dump to a sewer

vertical merger

A vertical merger is the merger of two or more companies that provide different supply chain functions for a common good or service. Most often, the merger is effected to increase synergies, gain more control of the supply chain process, and ramp up business.

New Source Bias

Bias that occurs when regulations provide an incentive to keep assets past the efficient point.

deregulation

Deregulation is the reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry. Over the years the struggle between proponents of regulation and proponents of no government intervention have shifted market conditions.

Federal Trade Commission Act (1914)

Established the Federal Trade Commission to monitor business practices, false advertising, and dishonest labeling. (outlaws unfair methods of competition and unfair acts or practices that affect commerce)

marginal cost pricing

Marginal-cost pricing, in economics, the practice of setting the price of a product to equal the extra cost of producing an extra unit of output. By this policy, a producer charges, for each product unit sold, only the addition to total cost resulting from materials and direct labour. Efficient use but leads to losses for the monopoly usually

pure vs mixed conglomerate mergers

Pure conglomerate mergers involve firms with nothing in common, while mixed conglomerate mergers involve firms that are looking for product extensions or market extensions

Clayton Act of 1914

Strengthened Sherman Act, outlawed certain anticompetitive practices not prohibited by the Sherman Act, including price discrimination, tying contracts, exclusive dealing, interlocking directorates, and buying the corporate stock of a competitor

The Sherman Act of 1890

The Sherman Act broadly prohibits 1) anticompetitive agreements and 2) unilateral conduct that monopolizes or attempts to monopolize the relevant market. Anti-competition is judged per se but everything else is case-by-case

Robinson-Patman Act (1936)

The law prevents distributors from charging different prices to various retailers. The act only applies to interstate trade and contains a specific exemption for "cooperative associations."

interlocking directorates

The practice of having executives or directors from one company serve on the Board of Directors of another company. J. P. Morgan introduced this practice to eliminate banking competition in the 1890s.

Coase Theorem

The theorem states that if trade in an externality is possible and there are sufficiently low transaction costs, bargaining will lead to a Pareto efficient outcome regardless of the initial allocation of property. In practice, obstacles to bargaining or poorly defined property rights can prevent Coasean bargaining.

emissions trading

a system by which countries and organizations receive permits to produce a specified amount of carbon dioxide and other greenhouse gases, which they may trade with others.

2. The number of countries of the world classified as IACs in the text is:a. 27.b. 50.c. 75.d. 150.e. 250.

a. 27.

11. International comparisons of per-capita GDP may not reflect standard of living because ____________.a. Currency exchange rates may not fully account for differences in purchasing power, and thus people in a country with high per-capita GDP may have a lower standard of living because of high local prices for food, housing, or other necessities.b. People in some countries enjoy poverty and do not mind a lack of access to medicine, education, nutritious food, and safe drinking water.c. Markets do not exist in less-developed countries.d. None of the

a. Currency exchange rates may not fully account for differences in purchasing power, and thus people in a country with high per-capita GDP may have a lower standard of living because of high local prices for food, housing, or other necessities.

17. Which of the following statements is true?a. Discrimination against women and blacks reduces the demand for these workers resulting in lower wages paid these workers.b. Discrimination is no longer a problem in the United States.c. A negative income tax system is a plan in which everyone pays the same percentage of their income as taxes.d. A negative income tax system is a plan where those below a certain income receive a cash payment from the government.

a. Discrimination against women and blacks reduces the demand for these workers resulting in lower wages paid these workers.

3. According to the classification in the text, which of the following is not a LDC?a. Hong Kong.b. Israel.c. Argentina.d. Greece.

a. Hong Kong.

13. Which of the following are not counted when we compare a family's income to the poverty line?a. In-kind transfers such as food stamps, Medicaid, and public housing.b. Cash welfare payments such as from social security.c. Cash payments when a worker become unemployed.d. Both answers a. and b. above are correct.

a. In-kind transfers such as food stamps, Medicaid, and public housing.

17. Which antitrust act prohibits price fixing and other conspiracies and combinations that restrain trade and attempts to monopolize?a. Sherman Act of 1890b. Clayton Act of 1914c. Federal Trade Commission Act of 1914d. Robinson-Patman Act of 1936e. Celler-Kefauver Act of 1950

a. Sherman Act of 1890

19. Which of the following describes a tying contract?a. The seller of one product requires the buyer to purchase some other product (s).b. One firm buys the stock of a competing firm.c. The directors of one company serve on the board of directors of another company in the same industry.d. An agreement between a manufacturer and a retailer based on the condition that the retailer is not to carry any rival products of the manufacturer.

a. The seller of one product requires the buyer to purchase some other product (s)

15. The importance of the Federal Trade Commission Act of 1914 is that it:a. set up an independent agency with the power to investigate and bring antitrust court cases.b. strengthened the law against mergers.c. strengthened the law against price discrimination.d. All of the answers above are correct.

a. set up an independent agency with the power to investigate and bring antitrust court cases.

7. Countries are poor because they cannot afford to save and invest is called the: a. vicious circle of poverty. b. savings-investment trap. c. LDC trap. d. cycle of insufficient credit.

a. vicious circle of poverty.

gdp/capita comparisons are subject to 4 problems:

accuracy of ldc data, gdp ignores income distribution, changes in exchange rates affect gaps between contries, no cost of living adjustment difference between countries

Celler-Kefauver Act of 1950

amends the Clayton act, businessmen were able to find ways around kit by buying up a competitor's assets. The Celler-Kefauver Act prohibited that practice if competition would be reduced as a result of the asset acquisition

Government failure

an inefficient allocation of resources caused by government intervention in the economy

17. Which of the following can be a barrier to an LDC's economic growth and development? a. Low population growth. b. A low level of human capital. c. Faster capital accumulation. d. More infrastructure

b. A low level of human capital.

9. Which of the following mergers would result from the purchase of a paper mill by a textbook publishing company?a. An interlocking merger.b. A vertical merger.c. A conglomerate merger.d. A horizontal merger.

b. A vertical merger.

18. Which antitrust act prohibits exclusive dealing, tying contracts, stock acquisitions, and interlocking directorates?a. Sherman Act of 1890.b. Clayton Act of 1914.c. Federal Trade Commission Act of 1914.d. Robinson-Patman Act of 1936.e. Celler-Kefauver Act of 1950.

b. Clayton Act of 1914

5. Which of the following is not generally considered to be an ingredient for economic growth? a. Investment in human capital. b. Political instability. c. High savings rate and investment in capital. d. Growth in technology. e. Investment in infrastructure.

b. Political instability.

20. The "Four Tigers" of East Asia are the newly industrialized countries of Taiwan, South Korea, Hong Kong, and: a. Japan. b. Singapore. c. The Phillippines. d. Vietnam.

b. Singapore.

15. The poverty line:a. separates those on welfare from those not on welfare.b. equals three times an economy food budget.c. equals the median income level.d. All of the answers above are correct.

b. equals three times an economy food budget.

14. Under the Clayton Act, horizontal mergers by stock acquisition were:a. not considered.b. illegal if they could be shown to lessen competition.c. illegal under any circumstances.d. legal if they could be shown to lessen competition.

b. illegal if they could be shown to lessen competition.

18. Capital goods provided by the government such as roads, airports, and water systems make up the country's: a. supply of capital. b. infrastructure. c. standard of living. d. political environment.

b. infrastructure

20. Consider a law that limits women's access to certain "dangerous" occupations like coal mining and military combat service. Such a law would likely reduce women's wages because:a. women would be overqualified for "non-dangerous" jobs.b. labor supply in female-intensive occupations would increase.c. women would be less likely to obtain college degrees.d. comparable worth would no longer exist between men's and women's occupations.

b. labor supply in female-intensive occupations would increase.

20. Which of the following statements is true?a. A vertical merger is a merger of firms that compete in the same market.b. The rule of reason doctrine declares that the existence of monopoly alone is illegal.c. Government regulation of a natural monopoly is economically justifiable.d. Deficient information on unsafe products causes underconsumption.

c. Government regulation of a natural monopoly is economically justifiable

8. Which of the following is infrastructure? a. Police. b. Training and education. c. Highways. d. All of the answers above are correct. e. None of the answers above are correct.

c. Highways

15. The poorest regions in the world, as measured by GDP per capita, are: a. Latin America and the Caribbean. 6 b. the Middle East and North Africa. c. Sub-Saharan Africa and South Asia. d. Australia and New Zealand

c. Sub-Saharan Africa and South Asia

14. Which of the following statements is true?a. Income distribution in the United States has gotten progressively more unequal since 1929.b. The Lorenz curve indicates the degree of discrimination in an economy.c. The Lorenz curve indicates the degree of income inequality in an economy.d. The richest 5 percent of Americans earn approximately half of the nation's income.e. All of the answers above are correct.

c. The Lorenz curve indicates the degree of income inequality in an economy.

12. Which of the following correctly describes the Lorenz curve?a. The Lorenz curve shows that the increasing income inequality in U.S. society is actually good for the economy, and makes everyone better off.b. The Lorenz curve shows the growth rate in real median family income over time. c. The Lorenz curve shows the cumulative distribution of family income, ranked from the poorest to the richest families, and compares that curve with the straight line indicating perfectly equal income distribution.d. The Lorenz curve shows the cumulative distribution of family income, ranked from the richest to the poorest families, and compare that curve with the ideal of having all income received by the richest 5 percent of society.

c. The Lorenz curve shows the cumulative distribution of family income, ranked from the poorest to the richest families, and compares that curve with the straight line indicating perfectly equal income distribution.

16. Which of the following deals most centrally with price discrimination?a. The Sherman Act.b. The Clayton Act.c. The Robinson-Patman Act.d. All of the answers above are correct.

c. The Robinson-Patman Act.

13. Which of the following is an example of a multilateral lending agency that makes loans, rather than gifts of foreign aid, to less-developed countries? a. The Agency for International Development.b. The International Red Cross.c. The World Bank.d. Church World Relief.

c. The World Bank

18. Which of the following government programs provides recipients with in-kind benefits?a. Temporary Assistance to Needy Families (TANF).b. Social Security.c. The food stamp program.d. Unemployment compensation.

c. The food stamp program.

1. According to the classification in the text, which of the following is not an IAC?a. New Zealand.b. South Korea.c. United Arab Emirates.d. All of the answers above are IACs.

c. United Arab Emirates.

Between 1929 and 2014, as measured by the Lorenz curve, income inequality:a. increased sharply. b. remain unchanged.c. declined.d. increased.

c. declined

19. Under a negative income tax program.a. the poor would have no incentive to work.b. other welfare programs such as food stamps would become even larger.c. government bureaucracy could be decreased.d. people with incomes slightly above the break-even level could still receive cash payments.

c. government bureaucracy could be decreased.

1. Firms that place their assets in the custody of a board of trustees is called a:a. utility.b. oligopoly.c. trust.d. None of the answers above are correct. e. All of the answers above are correct.

c. trust.

16. Which of the following statements is true?a.All people in poverty are on welfare.b.Unemployment compensation is an in-kind transfer. 6c.Temporary Assistance to Needy Families (TANF) is an example of a cash payment made by government to the impoverished.d.After cash assistance and in-kind transfers are considered, the distribution of income in the United States is more unequal.e.All of the answers above are correct.

c.Temporary Assistance to Needy Families (TANF) is an example of a cash payment made by government to the impoverished.

what are 2 types of short run antipoverty measures

cash transfer and in-kind transfers

private benefits and costs

costs and benefits to only the decision maker

The Lorenz curve measures the:a. distribution of wealth. b. effectiveness of government transfer payments. c. extent to which family incomes are affected by welfare.d. All of the answers above are correct.

d all of the above

11. Which of the following most closely represents the share of total U.S. income for the poorest 20 percent of all U.S. families? 5a. 47 percent.b. 23 percent.c. 10 percent.d. 4 percent.

d. 4 percent.

7. The rule of reason was applied in which of the following cases?a. American Tobacco Trust case.b. U.S. Steel case.c. Standard Oil case.d. All of the answers above are correct. e. None of the answers above are correct.

d. All of the answers above are correct

11. Which of the following involved deregulation?a. Motor Carrier Act of 1982.b. Staggers Rail Act of 1980.c. Airline Deregulation Act of 1978.d. All of the answers above are correct.

d. All of the answers above are correct.

4. Which of the following is a problem when comparing GDPs per capita between nations?a. GDP per capita is subject to greater measurements errors for LDCs compared to IACs.b. Fluctuations in exchange rates effect differences in GDP per capita.c. GDP per capita fails to measure income distribution. d. All of the answers above are correct. e. None of the answers above are correct.

d. All of the answers above are correct.

6. Which of the following statements is true? a. A less developed country (LDC) is a country with a low GDP per capita, low levels of capital, and uneducated workers. b. The vicious circle of poverty exists because GDP must rise before people can save and invest. c. LDCs are characterized by rapid population growth and low levels of investment in human capital. d. All of the answers above are correct.

d. All of the answers above are correct.

9. Which of the following statements is true? a. There is no single correct strategy for economic growth and development. b. In general, GDP per capita is highly correlated with alternative quality of life measures. c. The "New International Economic Order" is a set of proposals by LDCs that would give them greater control over the policies of international financial institutions. d. All of the answers above are correct.

d. All of the answers above are correct.

3. Price discrimination that tends to lessen competition is outlawed by the:a. Interstate Commerce Act.b. Federal Trade Commission Act. c. Sherman Act.d. Clayton Act.

d. Clayton Act.

14. Which of the following is not a common characteristic of industrially advanced countries (IACs)?a. Market-based economies.b. Large stocks of technologically advanced capital.c. Well-educated labor.d. Low per capita energy consumption.

d. Low per capita energy consumption.

8. The official poverty line is defined as:a. two times the cost of minimal food requirement. b. one-third the average family income. c. one-half the average family income. d. None of the answers above are correct.

d. None of the answers above are correct.

12. Which of the following best describes the cycle of poverty?a. Rich countries eventually decline because is citizens become lazy.b. Poor countries eventually improve through investment in education, infrastructure, and capital accumulation.c. Rich countries stay rich through continued high levels of investment in education, infrastructure, and capital accumulation.d. Poor countries stay poor because they cannot afford to invest in education, infrastructure, and capital accumulation.

d. Poor countries stay poor because they cannot afford to invest in education, infrastructure, and capital accumulation.

8. The per se rule applied in which of the following cases?a. The Utah Pie case.b. The Standard Oil case.c. The MIT case.d. The Alcoa case.

d. The Alcoa case

19. Which of the following makes short-term, conditional loans to developing countries? a. The Agency for International Development (AID). b. The World Bank. c. The North American Free Trade Agreement (NAFTA). d. The International Monetary Fund (IMF).

d. The International Monetary Fund (IMF).

10. Comparable worth is the principle that:a. men and women should be paid comparably.b. the wage rate equals the value of productivity.c. goods and services priced the same have about the same worth.d. employees who perform comparable jobs should be paid the same wage.

d. employees who perform comparable jobs should be paid the same wage.

According to the statistics, the distribution of money income: a. has not changed greatly since 1929.b. changed significantly in favor of the top 5 percent since 1929. c. fluctuated widely since 1947.d. has not fluctuated greatly since 1947.

d. has not fluctuated greatly since 1947.

6. Under the Clayton Act, which of the following was illegal, even if it was shown not to lessen competition substantially:a. price discrimination.b. tying contracts.c. horizontal mergers by stock acquisition.d. interlocking directorates.

d. interlocking directorates.

16. GDP per capita is a relatively good measurement of: a. the distribution of income. b. purchasing power. c. household production. d. the standard of living.

d. the standard of living.

the regulatory trend in the US to day is towards

deregulation

The highest fifth of all families receive approximately percent of the distribution of annual money income among families. a. 5.b. 10.c. 25.d. 75.e. 50.

e. 50.

10. Which of the following is true concerning GDP per capita comparisons?a. The accuracy of LDC GDP per capita data is questionable. b. GDP per capita ignores the degree of income distribution.c. GDP per capita is affected by exchange rate changes.d. GDP per capita does not account for the difference in cost of living among nations. e. All of the answers above are correct.

e. All of the answers above are correct.

4. A firm that acquires the stock of a competing firm and there is a substantial lessening of competition, would be in violation of the:a. Robinson-Patman Act.b. Sherman Antitrust Act.c. Federal Trade Commission Act.d. Interstate Commerce Act. e. Clayton Act.

e. Clayton Act.

9. Which of the following might increase the supply curve of labor?a. Increasing licensing requirements.b. Increasing discrimination against females.c. Increasing discrimination against blacks.d. All of the answers above are correct. e. None of the answers above are correct.

e. None of the answers above are correct.

5. Suppose a firm offers quantity discounts or special promotional allowances only to favored distributors, and the effect is to substantially lessen competition. This firm would be in violation of the:a. Celler-Kefauver Act.b. Sherman Antitrust Act.c. Federal Trade Commission Act.d. Clayton Act.e. Robinson-Patman Act.

e. Robinson-Patman Act.

2. The antitrust law that prohibits firms from combining or conspiring to restrain trade in interstate commerce is the:a. Robinson-Patman Act. b. Clayton Act. c. Celler-Kefauver Act.d. Federal Trade Commission Act. e. Sherman Antitrust Act.

e. Sherman Antitrust Act.

10. The Interstate Commerce Commission (ICC) was established in 1887 to regulate:a. interstate sales of food and drugs. b. water transportation.c. nationwide advertising.d. banking. e. railroads.

e. railroads.

Command-and-control regulations

firms must purchase anti pollution measures and take up the cost of being more environmental friendly and socially responsible

how is economic growth measured

gdp per capita

Unemployment Compensation

government payments to those who recently lost their jobs through no fault of their own

poverty

income inadequate to purchase 3x minimum food economy budget

effective long-run antipoverty programs must...

increase skills and productivity of the poor

there are less developed countries, and there are

industrially advanced nations (iac)

market failure

inefficient distribution of goods and services in the free market.

rule of reason

monopolies are not subject to prosecution unless they are acting anticompetitively

rule of per se

monopolies are outright illegal

reasons (cases) for more government regulation

natural monopolies, externalities, imperfect information (compared to marginal-cost pricing and fair-return pricing strategies for monopolies)

growth and development are determined by 5 main factors:

natural resources, human resources, capital, technological progress, political environment

cash transfers are

payments from the government to improve qol of citizens. examples include social security, unemployment and afdc

offset

plans that make no demand on corporations to limit their economic activity, instead hoping to balance it out through positive environmental contributions.

in-kind transfers are

policies to improve standard of living for underprivileged groups without cash benefits, examples include medicaid, housing assistance, food stamps

development includes GDP/capita and the following

qol measures (life expectancy, literacy rates, per capity energy consumption)

sustainability

refers to practices that support long-term economic growth without negatively impacting social, environmental, and cultural aspects of the community.

Incentive-based regulation

regulation that is designed to induce changes in the behaviour of individuals or firms, in order to produce environmental, social, or economic benefits that would otherwise be prescribed by legislation. Examples include subsidies for pollution control and tradable emissions permits

two most important antitrust laws

sherman act of 1890, clayton act of 1914 (hm: federal trade commission act of 1914, robinsonpatman act of 1936, the cellar-kefauver act of 1950)

line of perfect equality

straight line from 0,0 to 100,100

social benefits and costs

sum of private and external costs

negative income tax

tax system that would make cash payments in the form of tax refunds to individuals when their income falls below certain levels

means test

test to determine whether a person/household is eligible to receive some benefits

Free-rider problem

the burden on a shared resource that is created by its use or overuse by people who aren't paying their fair share for it or aren't paying anything at all.

Lorenz Curve

the curve that illustrates actual income distribution

predatory pricing

the pricing of goods or services at such a low level that other suppliers cannot compete and are forced to leave the market.

comparable worth

workers (at similar positions) requiring comparable skills, responsibilities and effort should be paid the same