1. State governments often use licensing to limit the
entry of potential competitors
into the retail liquor industry. To the extent the licensing procedures limit
supply, push up prices, and lead to long-run economic profit, business
a. have an incentive to use both economic and political means in attempting to
obtain the valuable licenses.
b. have little incentive to enter the licensed industry.
c. would enter the industry only if the licenses were free.
d. would use economic, but not political, methods in attempting to obtain the
2. Which one of the following public policy alternatives is most likely to increase
the competitiveness of markets in the United States?
a. stricter quotas restricting the entry of textile products into the country
b. elimination of tariffs and quotas on automobiles, textiles, and steel products
produced in other countries
c. legislation allowing interlocking corporate directorates
d. adoption of tighter licensing restrictions limiting the entry of persons into
3. Which of the following practices is clearly illegal under current antitrust
a. quantity discounts based on cost savings
b. vertical mergers that do not lessen competition
c. conglomerate mergers
d. false or deceptive advertising
4. Which of the following was the first antitrust act passed in the United States?
a. the Federal Trade Commission Act
b. the Clayton Act
c. the Robinson-Patman Act
d. the Sherman Act
5. The Herfindahl Index is useful for measuring the
a. market power of large firms within an industry.
b. market power of the four largest firms in an industry.
c. competitiveness of the U.S. economy.
d. degree of foreign competition present in an industry.
6. In recent years, the federal government was been less likely to oppose mergers,
even those increasing a firm's market share, if
a. the merger is expected to reduce the prices paid by buyers of the industry's
b. both of the firms involved in the merger are large.
c. the firms compete in a market that is not served by foreign firms.
d. the firms compete in an industry that produces a homogenous product.
7. Economic theory indicates that regulations requiring automobile manufacturers to
produce cars with air bags, stronger bumpers, and higher gasoline mileage
a. increase the supply of automobiles and lead to lower automobile prices.
b. decrease the supply of automobiles and lead to higher automobile prices.
c. increase demand and lead to a lower market price of automobiles.
d. leave the market price of automobiles unchanged, since competition will force
manufacturers to bear the burden of these regulatory costs.
8. When making appointments to regulatory agencies, the special interest effect
indicates that vote-maximizing political entrepreneurs have a strong incentive to
appoint persons sympathetic to
a. the welfare of society in general.
b. the goals of economic efficiency.
c. the desires of those managing the regulated firms.
d. groups whose welfare is unlikely to be affected by the regulatory agency.
9. Public policies designed to improve the health, safety, and environmental
conditions of workers or consumers is called
a. antitrust policy.
b. social regulation.
c. economic regulation.
d. All of the above are correct.
10. Which one of the following statements best summarizes U.S. public policy toward
a. Public policy has consistently promoted competition.
b. Public policy has consistently promoted monopoly, even when competitive markets
would have been a realistic alternative.
c. Public policy has been contradictory, sometimes attempting to promote
competition and other times adopting regulatory policies that have stifled
d. Public policy has consistently promoted domestic competition while protecting
domestic producers from foreign competitors when they are receiving