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Antitrust laws were created to give the government the power to

A. block certain mergers and break up large firms into smaller ones.

B. block cartels, and break up regulatory capture.

C. force the firm to sell off the profitable parts of its operation.

D. block certain mergers that are determined to be uncompetitive.

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Bunny Greenfelder
Bunny GreenfelderLv2
13 May 2020

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Related questions

1) Assume that two firms (Firm A and Firm B) operate in the U.S. steel industry. The owner of Firm A writes the following letter to the owner of Firm B:

Dear Owner of Firm B,

I have concluded that if we both restrict output such that we each produce only 3 million tons of steel per year, we can both charge a price that will allow us to effectively monopolize the steel market and to maximize our joint profits. If you would like to enter into this agreement with me, please draft a contract that specifies this agreement and I will be more than willing to meet with you and sign it.

Sincerely,

Owner of Firm A

If this letter were sent in the year 1944, the:

a) Owners of both Firm A and Firm B would not be guilty of violating antitrust laws because antitrust laws in 1944 contained exceptions for certain nationally important industries like the steel industry.

b) Owners of both Firm A and Firm B would not be guilty of anything because there were no antitrust laws in existence in 1944.

c) Owner of Firm A would be guilty of violating antitrust laws only if she met with the owner of Firm B and signed the contract, but she would not be guilty if the attempt to monopolize the market failed because the owner of Firm B never responded to the letter.

d) Owner of Firm A would be guilty of violating antitrust laws because she merely attempted to monopolize the steel industry.

e) Owners of both Firm A and Firm B would not be guilty of violating antitrust laws because antitrust laws in 1944 applied only to industries made up of three or more firms.

 

2) Entry of new firms will continue in a monopolistically competitive industry until:

a) Marginal cost = 0 (zero).

b) Economic profit is negative.

c) Marginal revenue = marginal cost.

d) Economic profit equals zero.

e) Marginal Revenue = 0 (zero).

 

3) A monopolistically competitive firm usually charges less than a monopoly firm because:

a) It is part of a group of firms that have formally agreed to control the price and the output of a product.

b) Its primary goal is to reap monopoly profits by replacing competition with cooperation.

c) It has a monopoly, but potential entrants exist in the form of contestable markets.

d) It faces some degree of competition due to low barriers to entry.

e) Producing homogenous output is more expensive than producing differentiated output.

 

4) An example of price discrimination is when:

a) A single box of Froot Loops costs $3.50, but when purchased in a case of six, it costs only $3.00 per box.

b) You can purchase a new PC for half the price of a new Mac, even though they are both computers.

c) Procter & Gamble charges $9 for a bottle of Tide laundry detergent, while the store brand costs the consumer significantly less, despite being somewhat similar products.

d) Out-of-state students pay more for the same education as in-state students.

e)Movie theaters do not allow children into R-rated movies without a parent or guardian.

 

5) The Varsity, located in downtown Atlanta, is the world's largest drive-in restaurant. Located near the Georgia Tech campus, the drive-in attracts two distinct types of customers: college students and visitors to Atlanta. The owners are considering offering a student discount of $1 off their combo meal, which is regularly priced at $9. There are 5,000 students interested in purchasing a combo meal, with a maximum willingness to pay of $8. There are 5,000 visiting customers interested in purchasing the combo meal, with a maximum willingness to pay of $9. Assume that each customer, at most, will purchase a single meal and the marginal cost is $5. What will be the amount of total revenue for the Varsity if the owners offer a single price of $8 per combo meal?

a) $65,000

b) $85,000

c) $40,000

d) $80,000

e) $90,000

 

6) A competitive firm would have:

a) More elastic demand than a monopolistically competitive firm.

b) More inelastic demand than a monopolistically competitive firm.

c) A horizontal demand curve.

d) Bowed-in or bowed-out demand.

e) An upward-sloping demand curve.

 

7) It is unrealistic to regulate a natural monopoly at marginal cost pricing because:

a) The government is not allowed to regulate markets.

b) With this type of regulation, the firm will want to shut down, and that outcome is not desirable for society.

c) Firms do not need to follow regulations from the government.

d) Regulating a market causes more deadweight loss.

e) Marginal cost pricing ends up having the natural monopoly firm earn zero economic profits.

 

8) Price discrimination allows businesses to make additional profits and allows markets to work more:

a) Efficiently

b) Unfairly

c) Realistically

d) Equitably

e) Independently

 

9) Antitrust laws are designed to:

a) Increase prices.

b) Promote monopoly practices.

c) Promote awareness of government programs.

d) Promote competition.

e) Decrease output.

 

10) Barriers to entry:

a) Do not exist for monopolies.

b) Exist for perfectly competitive firms.

c) Restrict the entry of new firms into the market.

d) Always lead to profits.

e) Measure the ability of firms to set the price for a good.

Q1. Average total cost is equal to
a. AFC + AVC
b. AFC/total output
c. AFC/AVC
d. AVC/AFC

Q2. As output increases, the ATC
a. increases
b. decreases
c. remains constant
d. falls and then rises

Q3. Total profit is equal to
a. total revenue minus total cost
b. total revenue minus explicit cost
c. total revenue minus variable cost
d. total revenue minus marginal cost

Q4. Marginal cost crosses the
a. AVC curve at the highest point of the AVC curve
b. ATC curve at the lowest point of the ATC curve
c. AFC curve at the lowest point of the AFC curve
d. ATC curve at the highest point of the ATC curve

Q5. Wages paid are an example of an explicit cost of doing business.
a. true
b. false

Q6. Any revenue over and above total cost is labeled economic profit.
a. true
b. false

Q7. If the selling price of a product is $10, the average total cost is $8, and total sales are 5,000 units, the total profit will be
a. $5,000
b. $8,000
c. $10,000
d. $20,000

Q8. Whenever marginal revenue exceeds marginal cost,
a. profit declines if output increases
b. profit increases if output increases
c. losses increase if output increases
d. marginal revenue must be rising

Q9. Under perfectly competitive conditions, marginal revenue is
a. greater than average revenue
b. equal to average revenue
c. less than average revenue
d. equal to the average variable

Q10. A firm's break-even point occurs where
a. marginal revenue equals marginal cost
b. marginal revenue equals average variable cost
c. total revenue equals total cost
d. total revenue equals total variable cost

Q11. The addition to total output resulting from using one more unit of a productive resource is the
a. average product
b. marginal input
c. total product
d. marginal product

Q12. Unlike a firm in pure competition, a monopolist may be able to
a. block the entry of new firms into the industry
b. continue to earn economic profits in the long run
c. earn economic profits in the short run
d. both (a) and (b)

Q13. Producer surplus is the difference between the price the firm is willing to sell its goods and the price it actually receives.
a. true
b. false

Q14. In the long run, under conditions of perfect competition, market forces come into play to
a. enhance profits
b. increase demand
c. eliminate profits
d. separate MR and AR

Q15. Consumer surplus is the area above the demand curve and below the equilibrium price.
a. true
b. false

Q16. Under perfect competition, market price is determined by market demand and supply.
a. true
b. false

Q17. The more that firms advertise, the closer they get to perfect competition.
a. true
b. false

Q18. Perfect competition assumes that a producer is interested in maximizing profit.
a. true
b. false

Q19. In the long run, under conditions of perfect competition, the buyer will eventually be able to buy the product at a
a. price equal to the lowest point on the ATC curve past the optimal scale of operation
b. price below cost
c. price equal to the lowest point on the ATC curve at the optimal scale of operation
d. discount

Q20. The lowest possible ATC curve is attained at the optimal scale of output.
a. true
b. false

1. To maximize profits, a firm should produce output up to the point where

A. marginal revenue equals marginal cost

B. price equals marginal cost

C. the gap between the demand curve and the ATC is the greatest

D. all of the above

E. answers a and b, but not c

2. Which statement is false?

A. a profit maximizing firm will increase production when price exceeds marginal cost

B. the lowest point on a firm's short-run supply curve is at the shut-down point

C. A firm will operate at that ouput where MC equals MR only when it is maximizing profits

D. A profit-maximizing firm will decrease production when marginal cost exceeds price.

3. which statement is true?

A. all monopolies are good

B. All monopolies are bad

C. Most natural monopolies are government regulated or government owned

D. None of these statements is true

4. There are _____ limits to monopoly power

A. no

B. some

C. many

5. Which statement is true?

A. the monopolist's most efficient output is her most profitable output as well

B. the monopolist charges a higher price than the perfect competitor in the long run.

C. all monopolists have control over an essential resource.

D. none is true

6. As a firm grows larger

A. economies of scale set in, then diseconomies of scale.

B. diseconomies of scale set in, then economies of scale.

C. economies of scale and diseconomies of scale set in at the same time.

D. neither economies of scale nor diseconomies of scale set in.

7. A monopolist operates at the minimum point of her ATC curve

A. only in the short run

B. only in the long run

C. in both the short run and the long run

D. in neither the short run nor the long run

8. A natural monopoly

A. has an average cost curve that reaches minimum possible average cost at a low level of output.

B. has a marginal cost curve that is steeply upward slopoing.

C. is usually subject to antitrust suits

D is usually allowed to choose its price so as to maximize profits in the United States.

E. occurs when a single firm can supply the entire market demand for a product at a lower average cost than would be possible if two or more firms supplied the market.

9. For a monopolist, the price of the product

A. always equals the marginal revenue

B. is always less than the marginal revenue

C. exceeds the marginal revenue

D. always equals the marginal cost of the product

10. Monopolies are usually viewed with concern from an economic standpoint since

A. size is ingerently dangerous; the larger ther firm, the more likely it is to squeeze out the "little producer"

B. resources may be allocated in an efficient manner.

C. the government may be put at the mercy of several large producers

D. always equals the marginal cost of the product

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