Multiple Choice – Section 05: Public Policy toward Monopolies
1.Whichofthefollowingisthepreferredstrategyforthegovernmenttofollowtoremedytheinefficientallocationofresourcesassociatedwithmonopolies?
a.preventingmergersthroughantitrustlaws
b.regulatingthepricesthatmonopoliescancharge
c.doingnothing
d.Noneoftheabovestrategiesispreferred.Eachisaviablestrategy.
2.Whichofthefollowingstatementsisnotcorrect?
a.Thegovernmentmayuseantitrustlawstobreakupanexistingcompanytoimprovecompetition.
b.Thegovernmentmaybreakupanaturalmonopolytolowerthepricechargedtocustomers.
c.Privateownershipistypicallypreferredtopublicownership.
d.Sometimesthebeststrategyisforthegovernmenttodonothingaboutmonopolyinefficiencybecausethe“fix”maybeworsethantheproblem.
3.Whichofthefollowingstatementsisnotcorrect?
a.Thegovernmentmayuseantitrustlawstopreventamergerifthegovernmentbelievesthemergerwillreducecompetitionandincreaseprices.
b.Byregulatinganaturalmonopolywherepriceequalsaveragetotalcost,themonopolyearnszeroprofits.
c.Anadvantageofprivateownershipoverpublicownershipisthatprivatebusinessownerstendtofireinefficientmanagers.
d.Thegovernmentshouldalwaysintervenetoimprovemonopolyinefficiency.
4.Whichofthefollowinggovernmentalactionswouldeliminatesomeoralloftheinefficiencythatresultsfrommonopolypricing?Thegovernmentcould
a.regulatethemonopoly.
b.prohibitedthemonopolyfrompricediscriminating.
c.forcethemonopolytooperateatapointwhereitsmarginalrevenueisequaltoitsmarginalcost.
d.Noneoftheabovewouldeliminateanyinefficiencyassociatedwithamonopoly.
5.Antitrustlawshaveeconomicbenefitsthatoutweighthecostsifthey
a.preventmergersthatwoulddecreasecompetitionandlowerthecostsofproduction.
b.preventmergersthatwoulddecreasecompetitionandraisethecostsofproduction.
c.allowmergersthatwoulddecreasecompetitionandraisethecostsofproduction.
d.Noneoftheaboveiscorrectbecauseantitrustlawsneverhaveeconomicbenefitsthatoutweighthecosts.
6.Whichofthefollowingstatementsisnotcorrect?
a.TwoexamplesofearlyantitrustlawsaretheShermanandClaytonAntitrustActs.
b.Antitrustlawsautomaticallypreventmergersbetweencompaniesthatproducesimilarproducts.
c.Antitrustlawsgivethegovernmentpowertoincreasecompetition.
d.Antitrustlawscanreducesocialwelfareiftheypreventmergersthatwouldlowercoststhroughmoreefficientjointproduction.
7.Whichofthefollowingstatementsiscorrect?
a.TwoexamplesofearlyantitrustlawsaretheClintonandStiglerAntitrustActs.
b.Antitrustlawsautomaticallypreventmergersbetweencompaniesthatproducesimilarproducts.
c.Antitrustlawsreducethegovernment’spowertoregulateprivatecompanies.
d.Antitrustlawscanreducesocialwelfareiftheypreventmergersthatwouldlowercoststhroughmoreefficientjointproduction.
8.Thefirstmajorpieceofantitrustlegislationwasthe
a.ClaytonAct.
b.ObamaCareAct.
c.ShermanAct.
d.ClintonAct.
9.ThelegislationpassedbyCongressin1890toreducethemarketpoweroflargeandpowerful”trusts”wasthe
a.MorganAct.
b.ShermanAct.
c.ClaytonAct.
d.14thAmendment.
10.ThelegislationpassedbyCongressin1914tostrengthenthegovernment’spowersandauthorizeprivatelawsuitswasthe
a.MorganAct.
b.ShermanAct.
c.ClaytonAct.
d.14thAmendment.
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