R20s- Econ FQ 13-14

Which company did United States antitrust regulators break up in 1984?

• Apple

• Microsoft

• AT&T

• General Mills

• Intel

Answer explanation

One way governments deal with monopolies is through regulation. In 1984, U.S. antitrust regulators broke up AT&T.

Microsoft’s bundling of its Internet browser with the Windows operating system could be BEST described as a(n)

• trust

• anti-competitive practice

• merger

• natural monopoly

• form of price discrimination

Answer explanation

Anti-trust regulators disapproved of Microsoft’s bundling of its Internet browser with the Windows operating system, as they viewed it as an anti-competitive practice.

Requiring public oversight agencies to approve utility rates is a form of

• anti-trust review

• market manipulation

• public ownership

• price discrimination

• regulation

Answer explanation

Monopolies are allowed in the United States, but they are often closely regulated. Public oversight agencies approving utility rates is a form of regulation

Which entity typically operates local water and sewer services?

• self-regulatory organizations

• municipal governments

• homeowner associations

• for-profit firms

• non-profit organizations

Answer explanation

Public ownership is one way that governments deal with monopolies. For example, municipal government typically operates local water, sewer, and sanitation services.

Which of the following statements BEST describes a consequence of perfect price discrimination?

• The marginal revenue curve shifts to below the demand curve

• The marginal revenue curve overlaps market demand.

• Equilibrium quantity decreases below the socially optimum level.

• Consumer surplus increases

• Social welfare decreases.

Answer explanation

In perfect price discrimination, a monopolist can charge each consumer its maximum willingness to pay. As a result, the marginal revenue curve overlaps market demand

Financial aid for university tuition is an example of

• rent-seeking behavior

• perfect competition

• social taxation

• regulation

• price discrimination

Answer explanation

Financial aid for university tuition is an example of price discrimination. Consumers can be grouped into different categories and charged different prices

Price discrimination does NOT increase

• captured benefits

• monopoly profits

• equilibrium quantity

• social welfare

• deadweight loss

Answer explanation

While price discrimination allows the monopolist to capture a larger fraction of the benefits produced by each transaction, it moves the market closer to the socially efficient quantity. As a result, deadweight loss decreases

Industries that resemble oligopolies produce all of the following goods EXCEPT

• washing machines

• breakfast cereal

• gasoline

• cigarettes

• aircraft

Answer explanation

Breakfast cereal, aircraft, cigarettes, and washing machines are all goods produced in highly concentrated industries. When a few suppliers dominate an industry, the market is called an oligopoly

How are oligopolies different than monopolies?

• They have fewer sellers

• They do not experience strategic interdependence among firms

• They must consider the choices of other suppliers.

• They charge higher prices.

• They charge a single market price

Answer explanation

Oligopolies are harder to analyze than monopolies because firms must also consider the choices of other suppliers. However, we can conclude that they do decrease social welfare to some extent

An agreement in which suppliers cooperate and behave like a monopolist is called a(n)

• quasi-monopoly

• subsidiary

• anti-trust

• cartel

• limited liability company

Answer explanation

An agreement of suppliers who cooperate and behave like a monopolist is called a cartel. The Organization of Petroleum Exporting Countries (OPEC) is an example of a cartel.