frequently shop during the week. What do economists call this price strategy used by high-end retailers? B) price discrimination 73. Which of the following is an example of price discrimination? D) All of the above are correct. 74. Which of the following statements comparing monopoly with competition is correct? B) With perfect price discrimination, the total surplus under monopoly can be the same as under competition. 110
75. Which of the following is the most likely reason the city council in New York City consistently denies licenses to independent van drivers selling rides to the public? D) The vans are a threat to the public transit monopoly, which makes campaign contributions to the city council members. 1. Which of the following may eliminate some or all of the inefficiency that results from monopoly pricing? A) The government can regulate the monopoly. 2. Antitrust laws have economic benefits that outweigh the costs if they B) prevent mergers that would decrease competition and raise the costs of production. 3. Which of the following statements is not correct? B) Antitrust laws automatically prevent mergers between companies that produce similar products. 4. Which of the following statements is correct? D) Antitrust laws can reduce social welfare if they prevent mergers that would lower costs through more efficient joint production. 111
5. The first major piece of antitrust legislation was the C) Sherman Act. 6. The legislation passed by Congress in 1890 to reduce the market power of large and powerful "trusts" is called the B) Sherman Act. 7. The legislation passed by Congress in 1914 to strengthen the government’s powers and authorize private lawsuits is called the C) Clayton Act. 8. The collection of statutes aimed at curbing monopoly power is called D) antitrust law. 9. In order for antitrust laws to raise social welfare, the government must C) be able to determine which mergers are desirable and which are not. 10. Reduced competition through merging of companies will raise social welfare B) if the benefit from the synergies exceeds the social cost of increased market power. 112
11. One method used to control the ability of firms to capture monopoly profit in the United States is through C) enforcement of antitrust laws. 12. Antitrust laws may D) restrict the ability of firms to merge. 13. Antitrust laws allow the government to D) All of the above are correct. 14. Antitrust laws allow the government to B) break up companies. 15. Splitting up a monopoly is often justified on the grounds that C) competition is inherently efficient. 16. Which of the following statements is not correct? A) Part of the deadweight loss associated with monopoly is measured by the monopolist's economic profit. 113
17. One problem with government operation of monopolies is that C) the government typically has little incentive to reduce costs.
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