Question 1

A local bank sells two services, cheque accounts and ATM card services. Mr Donethat is willing to pay $8 a month for the bank to service his cheque account and $2 a month for unlimited use of his ATM card. Ms Beenthere is willing to pay only $5 for a cheque account but is willing to pay $9 for unlimited use of her ATM card. To keep this example simple, assume that the bank can provide each of these services at zero marginal cost.
-According to the information provided, if the bank is unable to use tying, what is the profit-maximising price to charge for a cheque account?

Accepted Answer

A)   $8
B)   $5
C)   $9
D)   $24E) All of the above
F) C) and D)

Question 2

As the number of sellers in an oligopoly grows, an oligopolistic market looks more and more like a competitive market.

Accepted Answer

A) True 
 B)False

Question 3

A common solution to the monopoly problem is for government agencies to regulate prices.

Accepted Answer

A) True 
 B)False

Question 4

Tying can be thought of as a form of price discrimination.

Accepted Answer

A) True 
 B)False

Question 5

Government policies that aim to improve the efficiency of oligopolistic and monopoly markets are called:

Accepted Answer

A)   competition policy
B)   welfare policy
C)   state government policy
D)   equal opportunity policyE) A) and B)
F) A) and D)

Question 6

In Australia, the key competition regulator is the:

Accepted Answer

A)   Australian Commerce and Consumer Protection Commission
B)   Australian Competition and Consumer Commission
C)   Trade Practices Commission
D)   Australian Stock ExchangeE) A) and B)
F) B) and C)

Question 7

Competition laws may increase the cost of operating by restricting synergistic mergers.

Accepted Answer

A) True 
 B)False

Question 8

The practice of tying is used to encourage the enforcement of collusive agreements.

Accepted Answer

A) True 
 B)False

Question 9

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly:

Accepted Answer

A)   has no incentive to exit the industry
B)   will experience a price below average total cost
C)   may rely on a government subsidy to remain in business
D)   both B and C are trueE) A) and B)
F) C) and D)

Question 10

The intent of competition laws is to raise social welfare by limiting market power of some firms. To determine whether there has been a gain in social welfare, it is necessary to measure and compare the:

Accepted Answer

A)   benefits from synergies with the social benefits of reduced competition
B)   benefits from synergies with the social costs of reduced competition
C)   costs from synergies with the social costs of reduced competition
D)   costs from synergies with the social benefits of reduced competitionE) A) and B)
F) A) and D)

Question 11

If regulators want to allow monopolists to keep some of the benefits from lower costs in the form of higher profit:

Accepted Answer

A)   marginal-cost pricing is required
B)   a departure from marginal-cost pricing is required
C)   public ownership of monopolies is required
D)   application of the Trade Practices Act is requiredE) A) and B)
F) A) and C)

Question 12

Explain the practice of resale price maintenance and discuss why it is controversial.

Accepted Answer

Resale price maintenance is a requiremen...

Question 13

If regulators impose marginal-cost pricing on a natural monopolist, the government may have to:

Accepted Answer

A)   nationalise the monopolist
B)   require transparent pricing
C)   subsidise the monopolist
D)   tax the final productE) None of the above
F) B) and C)

Question 14

Economists generally agree that predatory pricing should be a concern for competition policymakers.

Accepted Answer

A) True 
 B)False

Question 15

Suppose Peach Computers has entered into a resale price maintenance agreement with Computer Super Stores Inc. (CSS Inc.)  but not with CompuMart. In this case:

Accepted Answer

A)   CompuMart will benefit from customers who go to CSS Inc. for information about different computers.
B)   CSS Inc. will sell Peach computers at a lower price than CompuMart.
C)   the wholesale price of Peach computers will be different for CSS Inc. than it is for CompuMart
D)   Peach computers will never increase profits by having a resale price maintenance agreement with all retail outlets that sell its products.E) A) and B)
F) A) and C)

Question 16

The degree of market failure caused by monopoly:

Accepted Answer

A)   is never a cause of concern
B)   is always greater than the political failure associated with reducing monopoly problems
C)   may often be less than the political failure associated with reducing monopoly problems
D)   is always capable of being fixed by using marginal-cost pricingE) C) and D)
F) A) and D)

Question 17

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly has no incentive to exit the industry.

Accepted Answer

A) True 
 B)False

Question 18

In 1998 the US Government charged Microsoft with the anti-competitive practice of tying. This was motivated by Microsoft bundling its internet browser into the Windows operating system.

Accepted Answer

A) True 
 B)False

Question 19

The argument that consumers will not be willing to pay any more for two items sold as one than they would for the two items sold separately is used to justify the legality of predatory pricing.

Accepted Answer

A) True 
 B)False

Question 20

Public bureaucrats who operate monopolies typically have lower incentives to lower costs.

Accepted Answer

A) True 
 B)False

Exam 17: Competition Policy

In 1998 the US Government charged Microsoft with the anti-competitive practice of tying. This was motivated by Microsoft bundling its internet browser into the Windows operating system.

Correct Answer
verified

The practice of tying is used to encourage the enforcement of collusive agreements.

Correct Answer
verified

The degree of market failure caused by monopoly:

Correct Answer
verified

If regulators want to allow monopolists to keep some of the benefits from lower costs in the form of higher profit:

Correct Answer
verified

Economists generally agree that predatory pricing should be a concern for competition policymakers.

Correct Answer
verified

Correct Answer
verified

As the number of sellers in an oligopoly grows, an oligopolistic market looks more and more like a competitive market.

Correct Answer
verified

The argument that consumers will not be willing to pay any more for two items sold as one than they would for the two items sold separately is used to justify the legality of predatory pricing.

Correct Answer
verified

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly:

Correct Answer
verified

Suppose Peach Computers has entered into a resale price maintenance agreement with Computer Super Stores Inc. (CSS Inc.) but not with CompuMart. In this case:

Correct Answer
verified

Government policies that aim to improve the efficiency of oligopolistic and monopoly markets are called:

Correct Answer
verified

In Australia, the key competition regulator is the:

Correct Answer
verified

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly has no incentive to exit the industry.

Correct Answer
verified

Public bureaucrats who operate monopolies typically have lower incentives to lower costs.

Correct Answer
verified

The intent of competition laws is to raise social welfare by limiting market power of some firms. To determine whether there has been a gain in social welfare, it is necessary to measure and compare the:

Correct Answer
verified

If regulators impose marginal-cost pricing on a natural monopolist, the government may have to:

Correct Answer
verified

Tying can be thought of as a form of price discrimination.

Correct Answer
verified

Explain the practice of resale price maintenance and discuss why it is controversial.

Correct Answer
verified
Resale price maintenance is a requiremen...
View Answer

Competition laws may increase the cost of operating by restricting synergistic mergers.

Correct Answer
verified

A common solution to the monopoly problem is for government agencies to regulate prices.

Correct Answer
verified

Exam 17: Competition Policy

In 1998 the US Government charged Microsoft with the anti-competitive practice of tying. This was motivated by Microsoft bundling its internet browser into the Windows operating system.

Correct AnswerverifiedShow Answer

The practice of tying is used to encourage the enforcement of collusive agreements.

Correct AnswerverifiedShow Answer

The degree of market failure caused by monopoly:

Correct AnswerverifiedShow Answer

If regulators want to allow monopolists to keep some of the benefits from lower costs in the form of higher profit:

Correct AnswerverifiedShow Answer

Economists generally agree that predatory pricing should be a concern for competition policymakers.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

As the number of sellers in an oligopoly grows, an oligopolistic market looks more and more like a competitive market.

Correct AnswerverifiedShow Answer

The argument that consumers will not be willing to pay any more for two items sold as one than they would for the two items sold separately is used to justify the legality of predatory pricing.

Correct AnswerverifiedShow Answer

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly:

Correct AnswerverifiedShow Answer

Suppose Peach Computers has entered into a resale price maintenance agreement with Computer Super Stores Inc. (CSS Inc.) but not with CompuMart. In this case:

Correct AnswerverifiedShow Answer

Government policies that aim to improve the efficiency of oligopolistic and monopoly markets are called:

Correct AnswerverifiedShow Answer

In Australia, the key competition regulator is the:

Correct AnswerverifiedShow Answer

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly has no incentive to exit the industry.

Correct AnswerverifiedShow Answer

Public bureaucrats who operate monopolies typically have lower incentives to lower costs.

Correct AnswerverifiedShow Answer

The intent of competition laws is to raise social welfare by limiting market power of some firms. To determine whether there has been a gain in social welfare, it is necessary to measure and compare the:

Correct AnswerverifiedShow Answer

If regulators impose marginal-cost pricing on a natural monopolist, the government may have to:

Correct AnswerverifiedShow Answer

Tying can be thought of as a form of price discrimination.

Correct AnswerverifiedShow Answer

Explain the practice of resale price maintenance and discuss why it is controversial.

Correct AnswerverifiedResale price maintenance is a requiremen...View AnswerShow Answer

Competition laws may increase the cost of operating by restricting synergistic mergers.

Correct AnswerverifiedShow Answer

A common solution to the monopoly problem is for government agencies to regulate prices.

Correct AnswerverifiedShow Answer

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Resale price maintenance is a requiremen...
View Answer

Correct Answer
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Correct Answer
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