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21-78
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 21-03 Identify and explain the economic principles and difficulties
relating to the setting of prices rates charged by so-called natural monopolies.
Test Bank: II
Topic: Industrial Regulation
198.
Which would be an example of public ownership as a response to natural monopolies?
A.
Federal Energy Regulatory Commission
199.
Which is the most valid criticism of the regulation of natural monopolies and other
firms subject to regulation by regulatory commissions?
A.
It is difficult to find enough honest people to serve on regulatory commissions.
200.
A labor market application of the legal cartel theory of regulation would be
A.
unemployment benefits.
21-79
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D.
occupational licensing.
201.
Which theory of regulation assumes that the industry wants to be regulated, in order to
reduce competition and achieve cartel-like conditions?
A. public interest theory
202.
Regulation of business, according to the legal cartel theory, stems from
A.
the public wanting protection from potentially capricious firms.
203.
The public interest theory of regulation
D.
guarantees higher rates for natural monopolies.
204.
The effectiveness of regulation is sometimes criticized because
A.
regulators try to please everybody.
205.
Which legislative act provided for the industrial regulation of the railroad industry by
the Federal government?
D.
Clayton Act
21-81
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 21-03 Identify and explain the economic principles and difficulties
relating to the setting of prices rates charged by so-called natural monopolies.
Test Bank: II
Topic: Industrial Regulation
206.
The theory of regulation developed to deal with "natural monopolies" is called
A. legal cartel theory.
207.
What development in the 1970s and 1980s is considered one of the most extensive
experiments in industrial policy in the last half-century?
A.
extensive antitrust enforcement
208.
Most economists agree that deregulation in the 1970s and 1980s greatly benefited
consumers in all of the following industries except
D.
trucking.
209.
The general conclusion of most economists about deregulation of previously regulated
industries in the United States is that it resulted in
A.
increased monopoly power.
210.
Government regulation concerning the conditions under which goods are produced, the
impact of production on society, and the physical qualities of the goods is known as
A. industrial regulation.
211.
Which of the following is mainly involved in social regulation?
A.
the Social Security Administration
212.
Social regulation
A.
was developed as a substitute for industrial regulation.
213.
The Occupational Safety and Health Administration is mainly involved in
A. industrial regulation.
21-84
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D if f i cul t y : 02 Medium
Learning Objective: 21-04 Discuss the nature of social regulation, its benefits and costs,
and its optimal level.
Test Bank: II
Topic: Social Regulation
214.
Which of the following is a primary concern of social regulation?
A.
price-fixing
215.
A major difference between industrial regulation and social regulation is that industrial
regulation
A.
covers many industries across the economy.
216.
Which of the following is not a true statement about how social regulation differs from
industrial regulation?
A.
Social regulation applies to many industries across the board, whereas industrial
regulation is more specific to one industry.
21-85
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B.
Social regulation intrudes into the day-to-day production processes of companies more
so than industrial regulation.
C.
Social regulation is enforced by state and local governments, whereas industrial
regulation tends to be the domain of the federal government.
D. Social regulation has expanded rapidly during the same period in which industrial
regulation has waned.
217.
Supporters of social regulation contend that
A.
the existence of natural monopoly requires a regulatory response from government.
218.
A criticism of social regulation is that it
A.
contributes to the growth of natural monopoly.
21-86
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
and its optimal level.
Test Bank: II
Topic: Social Regulation
219.
A caption that could serve as a warning to proponents of social regulation is
D.
"Protect the greatest number."
220.
A caption that could serve as a retort to opponents of social regulation would be
A.
"There is no free lunch."
221.
Critics of social regulation would argue that it
A.
decreases prices.
21-87
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Understand
D if f i cul t y : 02 Medium
Learning Objective: 21-04 Discuss the nature of social regulation, its benefits and costs,
and its optimal level.
Test Bank: II
Topic: Social Regulation
222.
Which of the following is not a major criticism of social regulation?
A.
It is anticompetitive.
223.
In 2007 British Airlines and Korean Air were charged with which antitrust violation?
224.
In 2013, Apple was convicted, along with five publishers, including Harper Collins,
Penguin, and Macmillan, of which antitrust violation?
A. monopoly structure
21-88
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written consent of McGraw-Hill Education.
B.
price-fixing
C.
tying contracts
D.
dividing up the market
225.
Using the Internet, some firms are now employing software that uses pricing
algorithms to constantly adjust their online prices in response to what rivals are charging for
similar
products. This is making it easier for the
D.
government to enforce industrial regulation.
226.
A 2000 ruling by a Federal court found that Microsoft, with its very popular Windows
operating system,
A. controlled 95 percent of the PC operating system market and thus was an illegal
21-89
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 21-02 Describe some of the key issues relating to the interpretation
and application of antitrust laws.
Test Bank: II
Topic: Antitrust Policy: Issues and Impacts
True / False Questions
227.
The cornerstone of antitrust policy in the United States is generally considered to be
the Sherman Antitrust Act of 1890.
228.
Antitrust policy pertains to government regulation of firms’ prices within selected
industries, such as utilities.
229.
All price discrimination is deemed illegal in antitrust legislation.
21-90
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
antimonopoly laws in the United States.
Test Bank: II
Topic: The Antitrust Laws
230.
Unfair advertising practices are investigated by the Federal Trade Commission.
231.
The government and courts have not been consistent in interpreting and enforcing
antitrust laws over the years.
232.
The rule of reason in antitrust applications means that if a firm has a dominant share of
the market, it stands to reason that it will exploit its monopoly power to gain an unfair
advantage over its rivals.
21-91
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Topic: Antitrust Policy: Issues and Impacts
233.
"Behavioralists" in antitrust applications believe that a firm that dominates a market is
not necessarily behaving unfairly.
234.
If a market is defined more broadly, then the chances that firms in that market will be
found to be violating antitrust laws based on the "structuralist" perspective will increase.
235.
A conglomerate merger is a merger between firms at different stages of the production
process of a product, such as a merger between a flour milling company and a baking
company.
21-92
236.
Strict enforcement of antitrust laws will generally complement the economic objective
of encouraging new technologies that require large amounts of capital investment.
237.
Public regulation rather than public ownership has been the primary means used in the
United States to ensure that the behavior of natural monopolists is socially acceptable.
238.
If the government regulates a natural monopoly and sets a "fair return" pricing policy,
then the regulated firm will have greater incentive to improve its operating efficiency.
239.
According to the legal cartel theory of regulation, firms desire to have government
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regulation because it protects them from competition.
240.
Most economists conclude that deregulation has reduced prices and led to more
competition in deregulated industries.
241.
Social regulation consists of regulating the behavior of people in society in order to
promote the safety and harmony in neighborhoods.
242.
One good example of a government agency involved mainly in social regulation is the
Food and Drug Administration.
21-94
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written consent of McGraw-Hill Education.
TRUE
243.
Supporters of social regulation contend that it has provided net benefits to society in
the form of greater safety, a better environment, and less discrimination.
