ECN 104 Lecture Notes - Lecture 1: Incomes Policy, Bell Canada, Capital Accumulation
6 Jun 2018
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Chapter10CompetitionPolicyandRegulation
Copyright©2010McGraw-HillRyersonLimited
Page1
CHAPTER 10
Competition Policy and Regulation
Topic Question numbers
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10.1 Industrial concentration 1-36
Competition policy 1-7
Merger types 8-24
Competition law 25-30
Merger guidelines 31-36
10.2 Industrial regulation 37-57
Natural monopoly 37-47
Problems with industrial regulation 48-54
Legal cartel theory 55
Deregulation 56-57
10.3 Social regulation 58-73
Distinguishing features 58-64
The optimal level of social regulation 65-71
Two reminders 72
Less government is not always better than more 73
The last word 74-75
True-false questions 76-92
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Chapter10CompetitionPolicyandRegulation
Copyright©2010McGraw-HillRyersonLimited Page2
1. Industrial concentration is said to exist whenever:
A) firms in an industry receive above-normal profits in the short run.
B) a single firm or a small number of firms control all, or a major portion of, the
output of a particular industry.
C) a unique product is produced by a single firm.
D) the product price in an industry exceeds marginal cost in the long run.
Ans: B Level: Easy Main Topic: 10.1 Industrial concentration Page: 254
Subtopic: The competition policy Type: Definition
2. One defence of industrial concentration is the contention that:
A) large market shares and high profits result from superior products.
B) monopolies and oligopolies often pay higher than market wage rates.
C) monopolists and oligopolists can force resource suppliers to supply inputs at lower-
than-competitive prices.
D) the prices that monopolists and oligopolists charge tend to equal average cost in the
long run.
Ans: A Level: Moderate Main Topic: 10.1 Industrial concentration Page: 254
Subtopic: The competition policy Type: Application
3. Industrial concentration:
A) may understate the degree of competition because of inter-industry competition,
foreign competition, and potential competition.
B) has resulted entirely from economies of scale.
C) has made the distribution of income less unequal.
D) has largely eliminated economic profits.
Ans: A Level: Moderate Main Topic: 10.1 Industrial concentration Page: 254
Subtopic: The competition policy Type: Application
4. The main purpose of the competition policy is:
A) to encourage firms to produce where P > MC.
B) the elimination of both negative and positive externalities.
C) to prevent the monopolization of industries.
D) to regulate natural monopolies.
Ans: C Level: Easy Main Topic: 10.1 Industrial concentration Page: 254
Subtopic: The competition policy Type: Application
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Chapter10CompetitionPolicyandRegulation
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5. Which is generally considered to be true of large business firms having monopoly power?
A) Society's resources are allocated more efficiently with such firms than with small
firms.
B) The existence of such firms leads to a more equal distribution of income.
C) Such firms often experience substantial economies of scale where existing
technology is highly advanced.
D) By supporting lobbyists and politicians with many different viewpoints, such firms
make possible a wider diffusion of political power.
Ans: C Level: Moderate Main Topic: 10.1 Industrial concentration Page: 254
Subtopic: The competition policy Type: Application
6. The market system often does not function competitively because:
A) market failures arise from the production of public goods.
B) a few large firms dominate major industries.
C) technological advance is limited.
D) capital accumulation is slow.
Ans: B Level: Easy Main Topic: 10.1 Industrial concentration Page: 254
Subtopic: The competition policy Type: Application
7. The major problem with an unregulated monopoly is that the monopolist will produce:
A) less output and sell at a higher price than would be the case in pure competition.
B) more output and sell at a higher price than would be the case in pure competition.
C) more output and sell at a lower price than would be the case in pure competition.
D) less output and sell at a lower price than would be the case in pure competition.
Ans: A Level: Moderate Main Topic: 10.1 Industrial concentration Page: 254
Subtopic: The competition policy Type: Application
8. The merger of a manufacturing firm in one industry with another manufacturing firm in
the same industry is called a:
A) horizontal merger.
B) vertical merger.
C) secondary merger.
D) conglomerate merger.
Ans: A Level: Easy Main Topic: 10.1 Industrial concentration Page: 254
Subtopic: Merger types Type: Definition
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Document Summary
Less government is not always better than more 73. Chapter 10 competition policy and regulation: industrial concentration is said to exist whenever: Subtopic: the competition policy type: definition: one defence of industrial concentration is the contention that: large market shares and high profits result from superior products. Society"s resources are allocated more efficiently with such firms than with small firms. The existence of such firms leads to a more equal distribution of income. Such firms often experience substantial economies of scale where existing technology is highly advanced. By supporting lobbyists and politicians with many different viewpoints, such firms make possible a wider diffusion of political power. Subtopic: the competition policy type: application: the market system often does not function competitively because, market failures arise from the production of public goods. D) a few large firms dominate major industries. technological advance is limited. capital accumulation is slow. h.
