Some economists see monopolies as inevitable, but not necessarily bad. They recommend
a policy of
a. regulating prices
d. encouraging concentration
e. splitting up the monopoly
42. Which of the following arguments are frequently used to justify laissez-faire policy?
a. b, c, and e
b. Many concentrated markets are contestable.
c. There is competition, even in the most concentrated markets.
d. Monopolies are inevitable.
e. Economic blocs keep prices down.
43. Some economists feel we should encourage market concentration because they believe
monopolists and oligopolists can
a. c and d
b. c, d, and e
c. become technically superior
d. achieve economies of scale
44. The term laissez-faire has the same meaning as which Beatles song?
a. Hey Jude
b. Penny Lane
c. Nowhere Man
d. Tax Man
e. Let it Be
45. Some economists believe that high concentration within industries is _________, and we
a. c, d, and e
b. terrible; deregulate the industries
c. beneficial; encourage it
d. inevitable; learn to live with it
e. not inevitable; break up monopolies
46. Some economists reject the idea that bigness is __________. These people believe our
policy should be __________.
a. c, d, and e
b. efficient or technologically superior; to encourage bigness
c. inevitable; to break big firms up
d. contestable; to contest bigness
e. inevitable; laissez-faire
47. A regulated firm is _________, but has no __________.
a. a monopolist; control over prices
b. privately owned; control over prices
c. privately owned; board of directors
d. a monopolist; board of directors
e. fully autonomous; board of directors
48. A natural monopoly has _________, but will __________ if left unregulated.
a. exclusive access to a natural resource; price competitively
b. exclusive access to a natural resource; not maximize profit
c. low average total cost; have high marginal costs
d. low average total cost; charge a high price
e. low average total cost; undercut its competitors
49. The Massachusetts Turnpike is a state toll-road where cars and trucks pay a fee in
proportion to the distance they travel and the weight of the vehicle. The road was built
with federal funds in the 1960s, but the state must pay for maintenance. Given what you
know about regulation, what do you think the toll charge for a particular car or truck
a. the average variable cost of maintenance
b. the marginal cost of maintenance
c. the monopoly price
d. price discrimination against bus passengers
e. a lump-sum tax
50. If a regulatory agency forces a natural monopolist to stop charging monopoly prices and
start charging competitive prices,
a. taxpayers will have to subsidize the firm
b. price will fall below AVC
c. the monopolist will shut down
d. stockholders will benefit
e. quantity produced will increase
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