homework 8_1 - Econ 2005 Principles of Microeconomics Dr...

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Econ 2005: Principles of Microeconomics Dr. Gebre Gebremariam Spring 2008 Homework 8 Due Date: Monday, 14 April 2008, at the end of class     Choose the one alternative that best completes the statement or answers the question and blacken the circle that corresponds  to your answer in the Scantron separately provided.  1) 
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The right  answer to the advertising debate is that  A) 
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advertising  always improves the functioning of the market.  B) 
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advertising  always leads to positive economic profits in an industry.  C) 
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advertising  always leads to industry concentration.  D) 
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there is no right  answer.    2) 
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The  Celler-Kefauver Act of 1950  A) 
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outlawed  specific monopolistic behaviors such as tying contracts, price discrimination, and unlimited mergers.  B) 
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extended the  language of the Federal Trade Commission Act to include "deceptive" as well as "unfair" competition methods.  C) 
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declared every  contract or conspiracy to restrain trade illegal.  D) 
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extended the  government's authority to ban vertical and conglomerate mergers.    3) 
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Economis ts no longer attack industry concentration with the same fervor they once did because  A) 
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the theory of  contestable  markets shows that even firms in highly concentrated industries can be pushed to produce efficiently under certain  market circumstances.  B) 
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substantial  economies of scale result in completely competitive market structures.  C) 
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small firms do  the most research in the United States.  D) 
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the benefits of  product differentiation and product competition are illusory.    4) 
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If the  Herfindahl-Hirschman Index of an industry is less than 1,000, then the Antitrust Division of the Justice Department  A) 
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considers the  industry already concentrated.  B) 
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considers the  industry unconcentrated.  C) 
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will challenge  any merger that raises the index by more than 50 points.  D) 
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will challenge  any merger that would increase the index by over 100 points.    5) 
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The  governme nt uses ________ figures contained in the Herfindahl-Hirschman Index (HHI) to help determine whether or not it will  challenge a proposed merger.  A) 
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concentration  ratio 
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B)  mar ket 
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profit 
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D)  barr iers to    6)  M price is  equal to marginal cost. 
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price is greater  than marginal cost.  C) 
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marginal cost is  less than average total cost.  D) 
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price is less  than marginal cost.    7) 
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monopoli stically competitive firm that is incurring a loss will produce in the short run as long as its revenue covers ________ costs.  A) 
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homework 8_1 - Econ 2005 Principles of Microeconomics Dr...

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