1. Both reasons for regulation, the theory of market failure and the public-choice theory of rent-seeking, explain the value of those regulations in terms of the public benefit of those government interventions.

• a. True
• b. False

2. What two theories does the text cite for government regulation of markets?

• a. Economies of scale and high sunk costs
• b. Diseconomies of scale and low sunk costs
• c. Market-failure effects on efficiency and public-choice rent-seeking
• d. Diminishing marginal product of labor and diminishing marginal utility

3. Static efficiency measures how well an economy performs at a given time with given resources and technology; dynamic efficiency measures the rate of growth in production possibilities and prosperity.

• a. True
• b. False

4. Much of traditional economic theory accepts that perfectly competitive markets are the most efficient in the static sense.

• a. True
• b. False

5. Joseph Schumpeter explained that competition among actual entrepreneurs encourages dynamic efficiency through innovation and technological change.

• a. True
• b. False

6. Traditional antitrust policy tends to oppose a Jeffersonian preference for dispersed economic power.

• a. True
• b. False