CLEP Microeconomics chapter practice4 questions

30 Antitrust and Economic Regulation

These questions come directly from the chapter practice in the book. Choose the best answer, check your reasoning, and use the explanation to correct any gap.

Question 1

Question 1 of 4

A merger raises an industry's HHI from 1,800 to 2,150. The change in HHI is

The increase is 2,150-1,800=350 points.
Show answer and explanation

B. 350

The increase is 2,150-1,800=350 points.

Question 2

Question 2 of 4

Antitrust policy is primarily intended to

Antitrust protects rivalry and consumer welfare; it does not guarantee the survival or equal size of individual competitors.
Show answer and explanation

A. protect competition from collusion and exclusion

Antitrust protects rivalry and consumer welfare; it does not guarantee the survival or equal size of individual competitors.

Question 3

Question 3 of 4

A natural monopoly exists when

When average cost falls across market demand, duplicating the network can raise total cost, making one supplier least costly.
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E. average cost falls throughout the market's demand range

When average cost falls across market demand, duplicating the network can raise total cost, making one supplier least costly.

Question 4

Question 4 of 4

A city is served most cheaply by one water-pipe network because average cost falls throughout market demand. Which policy most directly addresses the resulting market-power problem?

The cost structure favors one network, so economic regulation can constrain price and service without requiring wasteful duplication.
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C. Regulate the natural monopoly's price and service conditions

The cost structure favors one network, so economic regulation can constrain price and service without requiring wasteful duplication.

Quiz complete