Question

If union-sponsored advertisements for a particular product succeed in increasing the demand for that product, the:

a. marginal factor cost of union-labor will decrease.

b. demand for the union-labor used to produce the product will decrease.

c. marginal factor cost of union-labor will increase.

d. demand for the union-labor used to produce the product will increase.

If a good causes a positive externality, regulation might take the form of a

a. ban on the product.

b. tax.

c. subsidy.

d. price floor.

According to the per se rule, when would the courts find a monopoly in violation of the Sherman Antitrust Act?

a. Only when the monopoly created negative externalities.

b. Only when the monopoly engaged in illegal business practices.

c. Always-monopoly is per se illegal under the rule of reason.

d. Only when the monopoly charged excessively high prices.

Answer 1

1) If union-sponsored advertisements for a particular product succeed in increasing the demand for that product, the demand for the union-labor used to produce the product will increase. Here, we cannot say whether the marginal factor cost of union-labor will increase or decrease. Thus, here, option d is the correct answer.

2) If a good causes a positive externality, regulation might take the form of a subsidy. Here, option c is the correct answer. All other options will not be effective in raising social welfare.

3) Here option c is the correct answer. This is because under this act, its illegal to monopolize.