Question 1

Figure 10-16
  Figure 10-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 10-16.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

Accepted Answer

If a natural monopoly is required to produce at the economically efficient output level, which is where price equals marginal cost, the firm will not cover its average total costs and will sustain losses, making it unsustainable in the long run without subsidies.

Question 2

Figure 10-16
  Figure 10-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 10-16.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of ________ and charge a price of ________.

Accepted Answer

The answer of Figure 10-16
  Figure 10-16 shows the...

Question 3

Figure 10-17
  Your college decides to offer a psychology course as a MOOC that can be taken by students anywhere in the world, whether they are actually enrolled in your college or not. The demand and cost situation for the MOOC is shown in the figure.
-Refer to Figure 10-17.The faculty member who designed the course argues: "I think the course should be priced so that the maximum number of students enroll." How much profit (or loss)will the college make on the course if it charges this price?

Accepted Answer

The answer of Figure 10-17
  Your college decides to...

Question 4

The Herfindahl-Hirschman Index is one factor used to determine whether a merger between two firms should be allowed.Which of the following statements regarding the value of the Index for a given industry is true?

Accepted Answer

The answer of The Herfindahl-Hirschman Index is one factor used...

Question 5

Figure 10-17
  Your college decides to offer a psychology course as a MOOC that can be taken by students anywhere in the world, whether they are actually enrolled in your college or not. The demand and cost situation for the MOOC is shown in the figure.
-Refer to Figure 10-17.An economics professor argues: "I think the course should be priced so as to achieve economic efficiency." How much profit (or loss)will the college make on the course if it charges this price?

Accepted Answer

Economic efficiency is achieved when price equals marginal cost. If the course is priced at this level, the college will incur a loss of $1,080,000, as indicated by the cost structure in Figure 10-17.

Question 6

Economists played a key role in the development of merger guidelines by the Department of Justice and the Federal Trade Commission in 1982.These guidelines have three main parts.What are these parts?

Accepted Answer

The three main parts of the merger guidelines are market definition, measure of concentration, and merger standards.

Question 7

According to the Department of Justice merger guidelines,a proposed merger between two firms may be challenged if the post-merger Herfindahl-Hirschman Index

Accepted Answer

According to the Department of Justice merger guidelines, a proposed merger between two firms may be challenged if the post-merger Herfindahl-Hirschman Index (HHI) lies between 1,500 and 2,500 and the merger raises the HHI by more than 100 points. Therefore, choice B is the correct answer as it meets both of these criteria. Choices A, C, and D do not meet the correct criteria for challenging a proposed merger.

Question 8

Figure 10-17
  Your college decides to offer a psychology course as a MOOC that can be taken by students anywhere in the world, whether they are actually enrolled in your college or not. The demand and cost situation for the MOOC is shown in the figure.
-Refer to Figure 10-17.The dean of the college argues: "I think the course should be priced to maximize the profit the college earns,so these funds can be used to pay some other expenses." Which price should the dean favor?

Accepted Answer

The answer of Figure 10-17
  Your college decides to...

Question 9

Figure 10-17
  Your college decides to offer a psychology course as a MOOC that can be taken by students anywhere in the world, whether they are actually enrolled in your college or not. The demand and cost situation for the MOOC is shown in the figure.
-Refer to Figure 10-17.An economics professor argues: "I think the course should be priced so as to achieve economic efficiency." Which price should this faculty member favor?

Accepted Answer

The answer of Figure 10-17
  Your college decides to...

Question 10

Beginning in 1965,the head of the Antitrust Division of the U.S.Department of Justice began to change antitrust policy.How did antitrust policy change?

Accepted Answer

The answer of Beginning in 1965,the head of the Antitrust...

Question 11

Which two factors make regulating mergers complicated?

Accepted Answer

The answer of Which two factors make regulating mergers complicated?
...

Question 12

Figure 10-16
  Figure 10-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 10-16.Suppose the government regulates this industry in order to remove the inefficiency implied by the behavior of the profit-maximizing owners.If regulators require that the firm produces the economically efficient output level,what is this level and what price will be charged?

Accepted Answer

The economically efficient output level is where the price equals marginal cost (P=MC). In the given options, Q₄ units at price P₆ is likely where this condition is met.

Question 13

Congress has divided the authority to police mergers between the Antitrust Division of the U.S.Department of Justice (AD)and the Federal Trade Commission (FTC).How is this authority divided?

Accepted Answer

The answer of Congress has divided the authority to police...

Question 14

Baxter International,a manufacturer of hospital supplies,acquired American Hospital Supply,a distributor of hospital supplies.This is an example of

Accepted Answer

This is a vertical merger, as Baxter International acquired a distributor of hospital supplies.

Question 15

Merger guidelines developed by the U.S.Department of Justice and the Federal Trade Commission use the Herfindahl-Hirschman Index as a measure of concentration.This index measures concentration in an industry by

Accepted Answer

The Herfindahl-Hirschman Index measures concentration in an industry by squaring the market shares of each firm in an industry and then adding up the values of the squares.

Question 16

Consider an industry that is made up of six firms with the following market shares: Firm A - 50%,Firm B - 20%,Firms C and D - 10% each,and Firms E and F - 5% each.What is the value of the Herfindahl-Hirschman Index?

Accepted Answer

The Herfindahl-Hirschman Index is calculated by squaring the market share of each firm, and then summing those values. For this industry, the calculation would be:

(0.50^2) + (0.20^2) + (0.10^2) + (0.10^2) + (0.05^2) + (0.05^2) = 0.25 + 0.04 + 0.01 + 0.01 + 0.0025 + 0.0025 = 0.31

Multiplying this by 10,000 (to put it on the typical scale for the HHI) gives an index value of 3,100, which is closest to answer choice B.

Question 17

A horizontal merger

Accepted Answer

A horizontal merger is a merger between firms in the same industry.

Question 18

Figure 10-17
  Your college decides to offer a psychology course as a MOOC that can be taken by students anywhere in the world, whether they are actually enrolled in your college or not. The demand and cost situation for the MOOC is shown in the figure.
-Refer to Figure 10-17.The faculty member who designed the course argues: "I think the course should be priced so that the maximum number of students enroll." Which price should this faculty member favor?

Accepted Answer

The faculty member should favor a price of $0 because at this price, demand is the highest and the MOOC reaches the maximum number of students. While the cost per student is high at this price, the goal is to maximize enrollment rather than profit.

Question 19

Figure 10-16
  Figure 10-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 10-16.In the absence of any government regulation,the profit-maximizing owners of this firm will produce ________ units and charge a price of ________.

Accepted Answer

In the absence of any government regulation, the profit-maximizing owners of this firm will produce where marginal cost equals marginal revenue, which is at point E. From this point, the monopolist will charge the price corresponding to point F on the demand curve. Therefore, the monopolist will produce Q2 units and charge a price of P2.

Question 20

If a firm is a natural monopoly,competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit.How are prices usually set in natural monopoly markets in the United States?

Accepted Answer

Local or state regulatory commissions usually set prices for natural monopolies. These commissions are responsible for ensuring that prices are fair and reasonable, balancing the interests of both the natural monopoly and consumers. This helps to prevent the natural monopoly from charging excessively high prices and earning excessive profits, while ensuring that the natural monopoly is able to cover its costs and earn a reasonable rate of return.

Quiz 10: Monopoly and Antitrust Policy

Figure 10-16 Figure 10-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 10-16.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

Figure 10-16 Figure 10-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 10-16.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of and charge a price of .

The Herfindahl-Hirschman Index is one factor used to determine whether a merger between two firms should be allowed.Which of the following statements regarding the value of the Index for a given industry is true?

Economists played a key role in the development of merger guidelines by the Department of Justice and the Federal Trade Commission in 1982.These guidelines have three main parts.What are these parts?

According to the Department of Justice merger guidelines,a proposed merger between two firms may be challenged if the post-merger Herfindahl-Hirschman Index

Beginning in 1965,the head of the Antitrust Division of the U.S.Department of Justice began to change antitrust policy.How did antitrust policy change?

Which two factors make regulating mergers complicated?

Congress has divided the authority to police mergers between the Antitrust Division of the U.S.Department of Justice (AD) and the Federal Trade Commission (FTC) .How is this authority divided?

Baxter International,a manufacturer of hospital supplies,acquired American Hospital Supply,a distributor of hospital supplies.This is an example of

Merger guidelines developed by the U.S.Department of Justice and the Federal Trade Commission use the Herfindahl-Hirschman Index as a measure of concentration.This index measures concentration in an industry by

Consider an industry that is made up of six firms with the following market shares: Firm A - 50%,Firm B - 20%,Firms C and D - 10% each,and Firms E and F - 5% each.What is the value of the Herfindahl-Hirschman Index?

A horizontal merger

Figure 10-16 Figure 10-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 10-16.In the absence of any government regulation,the profit-maximizing owners of this firm will produce units and charge a price of .

If a firm is a natural monopoly,competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit.How are prices usually set in natural monopoly markets in the United States?

Quiz 10: Monopoly and Antitrust Policy

Figure 10-16 Figure 10-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 10-16.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

Figure 10-16 Figure 10-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 10-16.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of ________ and charge a price of ________.

The Herfindahl-Hirschman Index is one factor used to determine whether a merger between two firms should be allowed.Which of the following statements regarding the value of the Index for a given industry is true?

Economists played a key role in the development of merger guidelines by the Department of Justice and the Federal Trade Commission in 1982.These guidelines have three main parts.What are these parts?

According to the Department of Justice merger guidelines,a proposed merger between two firms may be challenged if the post-merger Herfindahl-Hirschman Index

Beginning in 1965,the head of the Antitrust Division of the U.S.Department of Justice began to change antitrust policy.How did antitrust policy change?

Which two factors make regulating mergers complicated?

Congress has divided the authority to police mergers between the Antitrust Division of the U.S.Department of Justice (AD) and the Federal Trade Commission (FTC) .How is this authority divided?

Baxter International,a manufacturer of hospital supplies,acquired American Hospital Supply,a distributor of hospital supplies.This is an example of

Merger guidelines developed by the U.S.Department of Justice and the Federal Trade Commission use the Herfindahl-Hirschman Index as a measure of concentration.This index measures concentration in an industry by

Consider an industry that is made up of six firms with the following market shares: Firm A - 50%,Firm B - 20%,Firms C and D - 10% each,and Firms E and F - 5% each.What is the value of the Herfindahl-Hirschman Index?

A horizontal merger

Figure 10-16 Figure 10-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 10-16.In the absence of any government regulation,the profit-maximizing owners of this firm will produce ________ units and charge a price of ________.

If a firm is a natural monopoly,competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit.How are prices usually set in natural monopoly markets in the United States?

Figure 10-16 Figure 10-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 10-16.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of and charge a price of .

Figure 10-16 Figure 10-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 10-16.In the absence of any government regulation,the profit-maximizing owners of this firm will produce units and charge a price of .