Holt 7525-9 S15_IT

Questions for Chapter 29
Fill-in-the-blanks:
1. ______________________ ______________________ is an industry in which economies
of scale are so important only one firm can survive.
2. ______________________ ______________________ is legislation intended to prohibit
attempts to monopolize markets or to engage in anti-competitive behavior.
3. A ______________________ merger is a merger of firms competing in the same product
market.
4. A ______________________ merger is a merger of firms in the same industry, but not at
the same stage in the production process.
5. A ______________________ merger is a merger of firms that are not in the same industry.
Multiple Choice:
___ 1. Market failure:
a. occurs when the market does not produce the optimal quantity of output
b. may occur due to a lack of perfect competition
c. Both of the above
d. Neither of the above
___ 2. For a natural monopoly market:
a. average total cost decreases over the entire market demand for the industry
b. if more than one firm enters the market, whichever firm gains the largest market
share will have a competitive advantage over all the other firms in the market
c. the largest firm will be operating at a lower average cost of production, since it is
producing at a lower point on the downward sloping average total cost curve
d. All of the above
___ 3. If a natural monopoly is unregulated, it will produce the quantity of output where:
a. marginal revenue equals marginal cost
b. price equals marginal cost
c. price equals ATC
d. ATC is minimized
___ 4. If a natural monopoly is regulated to produce the optimal quantity of output, it will produce
where:
a. marginal revenue equals marginal cost
b. price equals marginal cost
c. price equals ATC
d. ATC is minimized
___ 5. If a natural monopoly is regulated to earn zero economic profit, it:
a. may lack incentives to control costs
b. will produce the optimal quantity
c. will require a government subsidy to stay in business
d. Both b. and c. above
FOR REVIEW ONLY - NOT FOR DISTRIBUTION
29 - 9 Government Regulation of Business