BA 4309 – Regulation of Business,
Fall 2003– Test 2 Peter
Lewin.
Please read the
following carefully:
Multiple
Choice – 25 questions. Please use a 50 question scantron (882-ES)
with a pencil. Hand in only the scantron
(you may keep this question paper).
This is a closed book
exam. Cheating will result in a zero
(among other possible sanctions).
Among
the possibilities given in each question select the best
alternative.
Solution at end, grade distribution to follow.
1.
Which of the following has the effect of
raising the earnings of those affected?
a.
licensing of professionals
b.
organizing a trade union with certain
workers as members
c.
both of the above
d.
none of the above
2.
The existence of third party payer
medical insurance companies most likely
a.
causes the demand for medical care to
rise
b.
causes the demand for medical care to
fall
c.
causes the supply for medical care to
rise
d.
causes the supply for medical care to
fall
3.
Which of the following is the most likely
explanation for the rising price of health care?
a.
the supply is falling and the demand is
rising
b.
the demand is falling but the supply is
falling faster
c.
the demand is rising faster than the
supply
d.
the demand is rising slower than the
supply
4.
Which of the following is the most
restrictive form of quality control for the professions?
a.
licensing
b.
certification
c.
registration
d.
pronunciation
5.
Under perfectly discriminating monopoly
a.
every customer would be charged the same
price
b.
every customer would be charged a
different price
c.
every customer would be charged the
maximum price he/she is prepared to pay
d.
none of the above
6.
Perfect competition is considered to be
the most efficient possible outcome, this is because
a.
it encourages technological progress
b.
it encourages the greatest degree of
producer response to differing customer needs
c.
it ensures that the product is produced
and sold at the lowest possible cost under a given technology
d.
all of the above
7.
Which of the following is always true?
a.
when marginal cost is rising, average
cost is rising
b.
when marginal cost is falling average
cost is falling
c.
when marginal cost is constant marginal
cost is constant
d.
all of the above are true
8.
The electricity crises in
a.
changes in technology
b.
the weather
c.
price fixing regulation
d.
sunspots
9.
Redeeming of slaves in the
a.
an increase in the demand for slaves
b.
an increase in the number of slaves
offered for sale
c.
both of the above
d.
none of the above
10. Banning the performance of abortions under any
circumstances under penalty of severe punishment would most likely
a.
eliminate all abortions
b.
increase the cost of abortions
c.
increase the health risk to those seeking
illegal abortions
d.
b and c of the above
11. Which of the following influences the number of crimes
committed?
a.
the probability of being apprehended by
the police
b.
the probability of being charged for a
crime once apprehended
c.
the probability of being convicted once
changed
d.
all of the above
12. The most efficient expenditure policy for crime
deterrence is one for which
a.
the marginal benefit of increasing the
probability of apprehension is greater than the marginal benefit of increasing
the probability of conviction
b.
the marginal benefit of increasing the
probability of apprehension is less than the marginal benefit of increasing the
probability of conviction
c.
the marginal benefit of increasing the
probability of apprehension is equal to the marginal benefit of increasing the
probability of conviction
d.
the marginal benefit of increasing the
probability of apprehension is made independent of the marginal benefit of
increasing the probability of conviction
13. Nationalizing the delivery of health care
a.
would decrease the real cost of health
care
b.
would increase the real cost of health
care
c.
would not affect the real cost of health
care
d.
would increase the supply of health care
14. Nationalizing the delivery of health care and
providing it at a zero cost would in result in which of the following?
a.
an increase in the supply
b.
an increase in the amount demanded
c.
a shortage
d.
none of the above
e.
b and c of the above
15. Consider the imposing a tariff on the importation of
steel into the
a.
the cost to consumers is greater than the
benefit to producers
b.
the cost to consumers is less than the
benefit to producers
c.
there is no cost to consumers only a
benefit to producers
d.
there are no costs because steel
production becomes more efficient
16. Which of the following can be most compellingly
identified as a barrier to entry?
a.
predatory pricing
b.
high capital requirements
c.
licensing
d.
advertising
17. Government output is officially evaluated
a.
at cost – what the government spends
providing it
b.
by what the public would be prepared to
pay for it
c.
by the revenues the government collects
for it
d.
by the consumer surplus it generates
18. Assume an industry with a very large number of firms,
each one a price taker producing a standardized product. Assume further that a
fixed number of the firms have a production cost reflected in an average cost curve
that is 5% lower than the others at every output. Assume a competitive rate of
return is reflected in the average cost of all firms and is not included in
profits. Assume freedom of entry. In long run equilibrium(defined
as a situation when no entry and exit is occurring).
a.
no profits will be earned
b.
all firms will earn a 5% rate of return
above the competitive rate
c.
the low cost firms will earn a 5% rate of
return above the competitive rate
d.
there can be no long run equilibrium
19. Assume an industry defined by a standardized product
that is dominated by a firm (Firm A) that has a cost advantage because its
production process is more efficient. Assume there is one other firm (Firm B)
in the industry that is almost as efficient. Assume that the average cost
curves are smooth U shaped curves. Assume there is freedom of entry and that no
predatory behavior occurs. Over time
a.
the price will never be equal to the
minimum of an average cost curve
b.
the price will tend to be equal to the
minimum average cost of Firm B
c.
the price will never rise above the
minimum average cost of Firm B
d.
the price will never fall below the
minimum average cost of Firm B
e.
the price will tend to be at the minimum
average cost of Firm A
20. The effects of predatory behavior is likely to be most
costly for
a.
the potential entrant
b.
the incumbent
c.
the regulators
d.
the consumers
21. In order to completely establish that a foreign
producer is dumping its product on our domestic market it is necessary to
a.
establish that its price is lower than
the domestic price
b.
establish that it is producing below its
average cost
c.
establish either that it intends to raise
the price or cease production in the future
d.
all of the above
22. Which of the following occurs as a direct result of
differences in state tax rates?
a.
different weather patterns
b.
air pollution
c.
global warming
d.
cigarette smuggling
23. A dynamic view of antitrust would focus solely on
which of the following?
a.
the elasticity of demand facing the
alleged monopolist
b.
the vertical difference between the MR
and AR curves facing the alleged monopolist
c.
the identification of barriers to entry
protecting the alleged monopolist
d.
the market share the alleged monopolist
24. Historically, prior to deregulation, electricity in
this country has been supplied
a.
competitively
b.
by unregulated monopolies
c.
by regulated monopolies
d.
by a mixture of the above
25. Anti-trust law in
a.
competition is always fair
b.
consumers are not harmed by firms in a
position to resist competition and charge high prices
c.
supplies are paid a fair price
d.
all of the above
e.
none of the above
GRADE DISTRIBUTION:
If you score is greater than or equal to: your grade is
|
24 |
A+ |
|
20 |
A |
|
19 |
A- |
|
18 |
B+ |
|
17 |
B |
|
16 |
B- |
|
15 |
C+ |
|
10 |
C |
|
ELSE |
C- |
Solution: