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Chapter 25: Problem 23

Deregulation of the trucking industry resulted in __________. (LO5) a) many more firms and lower prices b) many more firms and higher prices c) fewer firms and lower prices d) fewer firms and higher prices

Short Answer

Expert verified
The correct answer is (a) many more firms and lower prices, as deregulation leads to increased competition in the trucking industry, resulting in lower prices.

Step by step solution

01

Understanding deregulation

Deregulation is the process of removing restrictions and regulations imposed by the government on a particular industry. This typically leads to increased competition, as more firms can enter the market, and decreased prices, as firms are pressured to offer competitive rates.
02

Analyzing the impact of deregulation on the trucking industry

When the trucking industry was deregulated, the barriers to entry were removed, and more firms could enter the market. This increased the competition in the industry, which in turn put downward pressure on prices. As a result, the number of firms increased and the prices decreased.
03

Evaluating the provided options

Based on our analysis, we can now evaluate the given options: a) many more firms and lower prices -> This option is consistent with our analysis. b) many more firms and higher prices -> This option contradicts our analysis since we anticipated lower prices due to increased competition. c) fewer firms and lower prices -> This option contradicts our analysis since we anticipated an increased number of firms due to deregulation. d) fewer firms and higher prices -> This option contradicts both our expectations regarding the number of firms and the prices after deregulation.
04

Selecting the correct answer

The correct answer is (a), as it aligns with the expected effects of deregulation on the trucking industry - deregulation allows for many more firms to enter the market, leading to lower prices due to increased competition.

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