Econ Final
A monopolist that engages in perfect price discrimination: a. charges the same price for every unit sold. b. charges a high price to bulk consumers of its product. c. charges a different price for every unit sold. d. refuses to sell its output to consumers of rival brands. e. divides all buyers into two mutually exclusive groups
c. charges a different price for every unit sold.
The exchange rate is the: a. rate that central banks charge each other for currency exchanges. b. ratio of exports to imports. c. cost of one nation's currency in terms of another nation's currency. d. interest rate the U.S. government charges on international loans. e. percentage of domestic goods that are exported.
c. cost of one nation's currency in terms of another nation's currency.
Suppose a person serves on the boards of directors of competing firms. The term used to describe this practice is _____. a. mediation b. free riding c. interlocking directorate d. exclusive dealing e. arbitration
c. interlocking directorate
For a natural monopolist, _____ throughout the range of market demand. a. average cost decreases b. average cost increases c. average cost remains constant d. there exist diseconomies of scale e. marginal cost exceeds average cost
a. average cost decreases
The rule of reason: a. applies to business practices that are illegal regardless of their economic rationale or their consequences. b. is based on the idea that business practices cannot be proven to be illegal, and a consent decree is required to halt the practices. c. applies to business practices that are legal regardless of their consequences. d. considers why a certain business practice was adopted and what the effects on competition are before determining whether the practice is illegal. e. focuses on market structure rather than on the behavior of firms in determining whether antitrust violations have occurred.
d. considers why a certain business practice was adopted and what the effects on competition are before determining whether the practice is illegal.
In game theory, the main difference between a dominant strategy & a Nash equilibrium is that with a dominant strategy, players choose their best strategy given what others choose; while in a Nash equilibrium players choose their best strategy regardless of what others choose.
False
Which of the following is not a condition for price discrimination? a. The presence of strong diseconomies of scale b. The presence of different groups of buyers with different price elasticity of demand c. The presence of some amount of market power with a producer d. The absence of a scope for reselling a product e. A downward-sloping demand curve for products
a. The presence of strong diseconomies of scale
A country has an absolute advantage in the production of a good if that country: a. can produce the good using fewer resources than another country would require. b. has the greatest opportunity cost of producing the good, regardless of whether it is produced with the fewest resources. c. has the lowest opportunity cost of producing the good and can produce it with the fewest resources. d. has the greatest opportunity cost of producing the good and produces it with the fewest resources. e. has the lowest opportunity cost of producing the good, regardless of whether it is produced with the fewest resources.
a. can produce the good using fewer resources than another country would require.
Comparative advantage refers to: a. the ability of an individual to produce a good at a lower opportunity cost than some other individual can. b. the amount of labor a particular individual needs to produce a fixed amount of capital goods. c. the ability of an individual to specialize and produce a greater amount of some good than another individual. d. the ability of an individual to produce a good using fewer labor hours than other individuals. e. the number of units of a good given up in order to acquire something.
a. the ability of an individual to produce a good at a lower opportunity cost than some other individual can
If on Monday of a week $1 = 146 Japanese yen and on Friday of the same week $1 = 147 yen, the dollar is said to have appreciated and the yen is said to have depreciated. a. True b. False
a. True
If the U.S. dollar appreciates in the foreign exchange market, then: a. U.S. exports will increase. b. American goods will become more expensive for foreign buyers and foreign goods will be cheaper for Americans. c. American goods will become less expensive for foreign buyers and foreign goods will be more expensive for Americans. d. neither the price of U.S. exports nor the price of U.S. imports will change. e. more U.S. dollars will be required to buy a foreign currency.
b. American goods will become more expensive for foreign buyers and foreign goods will be cheaper for Americans.
In which of the following ways can the government increase social welfare in an unregulated monopoly? a. By allowing the monopolist to maximize profit b. By forcing the monopolist to lower the price and expand output c. By providing tax exemptions to the monopolist d. By increasing corporate tax rates e. By forcing the monopolist to shut down operations
b. By forcing the monopolist to lower the price and expand output
Which act of Congress declared tying contracts, exclusive dealing, and price discrimination illegal? a. The Wheeler-Lea Act b. The Clayton Act c. The Celler-Kefauver Anti-Merger Act d. The Wheeler-Kefauver Act e. The Sherman Antitrust Act
b. The Clayton Act
The first federal antitrust law enacted in the United States was: a. The Federal Trade Commission Act. b. The Sherman Antitrust Act. c. The Herfindahl-Hirschman Act. d. The Clayton Act. e. The Robinson-Patman Act.
b. The Sherman Antitrust Act.
When government regulations force a natural monopoly to produce where price equals average total cost, social welfare is: a. less than it would be without regulation. b. greater than it would be without regulation, but it is not maximized. c. minimum. d. exactly the same as it would be without regulation. e. maximum.
b. greater than it would be without regulation, but it is not maximized.
When a price-discriminating monopolist divides its customers into two market segments, the price in each segment is determined by finding the level of output where that market's: a. marginal revenue equals average total cost. b. marginal revenue equals marginal cost. c. marginal cost equals average total cost. d. average revenue equals average variable cost. e. average revenue equals average total cost
b. marginal revenue equals marginal cost.
The practice of charging different prices to different consumers for the same product is called: a. arbitration. b. price discrimination. c. marginal cost pricing. d. unit pricing. e. predatory pricing.
b. price discrimination.
The Sherman Act _____. a. regulated the railroads b. prohibited restraint of trade c. exempted insurance companies from antitrust laws d. created the Federal Trade Commission e. prohibited fraudulent advertising
b. prohibited restraint of trade
The purpose of antitrust laws is to _____. a. prevent large-scale production b. reduce anticompetitive activities c. guarantee worker safety d. increase anticompetitive activities e. promote quality products
b. reduce anticompetitive activities
An import quota is a tax on imports. a. True b. False
b. False
U.S. consumers would be better off if they bought only U.S.-produced goods. a. True b. False
b. False
Which of the following is the best example of a natural monopoly? a. IBM producing computers b. A company involved in gold mining in the Colorado Rocky Mountains c. A company providing electrical service to homes in Seattle d. Kodak producing film e. A company involved in filmmaking in Hollywood
c. A company providing electrical service to homes in Seattle
For which of the following products would price discrimination be easiest? a. Diamonds b. Compact disks c. Haircuts d. Gasoline e. Orange juice
c. Haircuts
A requirement that buyers of one service must also purchase another service from the same seller is called _____. a. an interlocking merger b. a vertical merger c. a tying contract d. exclusive dealing e. a legal agreement
c. a tying contract
International trade is most likely to occur whenever: a. world production equals world consumption. b. nations have an absolute advantage in the production of goods. c. each of the trading nations gains from trade. d. all of the trading nations are self-sufficient. e. labor is cheaper abroad.
c. each of the trading nations gains from trade.
A price-discriminating monopolist divides its customers into two segments based on price elasticity of demand. If it sells its product for a price of $42 in the market segment where demand is relatively less price elastic, the price in the market segment where demand is more price elastic will be: a. equal to the marginal revenue in that market segment. b. $42. c. less than $42. d. greater than $42. e. less than the marginal revenue in that market segment.
c. less than $42.
_____ handle antitrust matters in the U.S. a. The Department of Justice and the Council of Economic Advisors b. The Federal Trade Commission and the Securities and Exchange Commission c. The Department of Justice and Congress d. The Department of Justice and the Federal Trade Commission e. The Federal Trade Commission and Congress
d. The Department of Justice and the Federal Trade Commission
Which agency was created by Congress in 1914 to investigate and regulate unfair methods of competition? a. The Interstate Commerce Commission b. The General Accounting Office c. The Council on Competitiveness d. The Federal Trade Commission e. The Department of Justice
d. The Federal Trade Commission
Which of the following is the main criticism of the Sherman Act? a. The Sherman Act has been criticized to be unnecessary at the time. b. The Sherman Act has been criticized to be overly harsh. c. The Sherman Act has been criticized to have come into effect too late. d. The Sherman Act has been criticized to be too vague. e. The Sherman Act has been criticized to be identical to an existing law.
d. The Sherman Act has been criticized to be too vague.
Which of the following acts of Congress declared restraint of trade illegal and declared any attempt at monopolizing unlawful? a. The Clayton Act b. The Celler-Kefauver Anti-Merger Act c. The Clayton-Celler Act d. The Sherman Antitrust Act e. The Wheeler-Lea Act
d. The Sherman Antitrust Act
A camera manufacturer sells its cameras only to retailers who agree to buy the brand of film it sells. This is an example of _____. a. an interlocking directorate b. exclusive dealing c. price discrimination d. a tying contract e. a trust
d. a tying contract
If the U.S. dollar depreciates in the foreign exchange market, American exports will _____ and American imports will _____. a. decrease; increase b. be less expensive; be less expensive c. be more expensive; be more expensive d. be less expensive; be more expensive e. be more expensive; be less expensive
d. be less expensive; be more expensive
A natural monopoly, such as a local telephone company, is characterized by _____. a. low fixed costs and diseconomies of scale b. constant costs of production c. a lack of government regulation d. economies of scale e. a lack of natural competitors
d. economies of scale
If a regulator sets the price in a natural monopoly equal to the monopolist's marginal cost, the monopolist will _____. a. face a horizontal demand curve b. earn an economic profit c. shut down in the short run d. experience a loss e. earn zero economic profit
d. experience a loss
In a(n) _____, throughout the range of market demand, marginal cost is less than average cost and pulls average cost downward. a. oligopoly market b. duopoly c. perfectly competitive market d. natural monopoly e. monopsony
d. natural monopoly
The government of a state wants Gigantic Software Corp., a natural monopoly, to stay in business yet still produce where price equals marginal cost. In order to encourage Gigantic Software Corp. to stay in business, the government might choose to: a. impose a tax on the company for each dollar of sales. b. set a price ceiling 10 percent lower than its previous level. c. replace the company's top management. d. provide a subsidy to the company to cover the loss and ensure a normal profit. e. establish regulations that raise the company's cost of doing business.
d. provide a subsidy to the company to cover the loss and ensure a normal profit.
If Monica has a comparative advantage in baking and George has a comparative advantage in sewing, then: a. Monica must have an absolute advantage in sewing. b. George must have an absolute advantage in baking. c. Monica must have an absolute advantage in baking. d. we can conclude nothing about absolute advantage. e. George must have an absolute advantage in sewing.
d. we can conclude nothing about absolute advantage.
The index that the U.S. government currently uses to determine whether a merger should be allowed is the _____. a. four-firm concentration ratio b. Schumpeter index c. consumer price index d. Dow Jones average index e. Herfindahl-Hirschman index
e. Herfindahl-Hirschman index
A regulated natural monopoly that must set price equal to average cost will: a. earn a net economic profit. b. incur an economic loss. c. shut down in the short run. d. experience diseconomies of scale. e. earn a normal profit.
e. earn a normal profit
Ersatz Kreme will sell its donut filling to Hunky Donuts only if Hunky Donuts agrees not to buy donut filling from other suppliers. This is an example of _____. a. price discrimination b. a tying contract c. a trust d. an interlocking directorate e. exclusive dealing
e. exclusive dealing
Antitrust laws in the United States: a. involve suing a competitive firm for changing its prices. b. apply only to natural monopolies. c. clearly define acceptable behavior. d. provide protection to those in regulated industries. e. have been enforced in an inconsistent manner.
e. have been enforced in an inconsistent manner.
Anticompetitive business practices are illegal per se: a. only if they are prohibited by the Clayton Act. b. whether or not Congress has passed legislation prohibiting them. c. only if they result in a monopoly. d. only if there is no economic rationale for them. e. without regard to their economic rationale or consequences.
e. without regard to their economic rationale or consequences.
Production by a monopolist would result in the socially optimal allocation of resources if: a. marginal revenue is equal to marginal cost. b. price is set equal to average total cost. c. marginal revenue is equal to average total cost. d. price is set equal to marginal cost. e. marginal revenue is greater than price.
vd. price is set equal to marginal cost.
Under the U.S. antitrust law, a consent decree allows a firm to: a. challenge the government's accusation in court b. admit to an antitrust violation without a lawsuit c. cease the alleged wrongdoing after admitting guilt d. cease the alleged wrongdoing without admitting guilt e. admit to an antitrust violation without penalty
cease the alleged wrongdoing without admitting guilt
