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Chapter 27: Q. 1 (page 620)

Local cable television companies are sometimes granted monopoly rights to service a particular territory of a metropolitan area. The companies typically pay special taxes and licensing fees to local municipalities. Why might municipality give monopoly rights to a cable company?

Short Answer

Expert verified

A municipality grants monopoly rights to a cable company, based on the long-term benefits.

Step by step solution

01

Introduction

Due to large-scale economies of scale and efficiency, a municipality may grant monopoly rights to a single cable service provider.

If a single company provides cable service in a specific area, it may see the falling average cost.

02

Given Information

- Monopoly rights to service a specific territory within a metropolitan area are often granted to local cable television operators.

-Local governments receive special taxes and licensing fees from the businesses.

03

Explanation

A decrease in the average overall cost could aid in service expansion and efficiency. When a company obtains large-scale economies of scale, consumers benefit.

As a result, a municipality grants monopoly rights to a cable company, based on the long-term benefits.

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Most popular questions from this chapter

Suppose that in panel (a) of Figure 27-2, the vertical distances to points F and A are \(10per unit and \)2per unit, and Qm is 1,000units. To measure the degree of monopoly power, economists often examine the differential between price and marginal cost as a percentage of the price. What would be the value of this measure of monopoly power for the natural monopolist depicted in panel (a) of the figure?

An years past, firms around the world have secretly engaged in collusive agreements to restrain production and push prices above competitive levels.

Evidence compiled by government officials investigating such agreements has revealed that conspiring firms often utilize similar methods of establishing and enforcing collusive restraints of trade. Most agreements, for instance, assign to each firm an allowed market share, a permitted region of operations, or an approved set of customers. In addition, participating firms commonly are required to exchange sales information so that they can monitor adherence to their agreements to restrain trade. In this chapter, you will learn why firms that typically utilize these techniques to formulate and maintain collusive agreements engage in secret conspiracies: Such agreements are illegal under U.S. antitrust laws.

Explain the main rationales for regulation of industries that are not inherently monopolistic

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Manufacturing firms based in Columbus, Ohio, and Erie, Pennsylvania, have proposed a merger. If they were to merge, the resulting value of the Herfindahl-Hirschman Index in the nationwide market for the product they produce would rise from 1,400 to 1,800. Under current U.S. antitrust guidelines, would this proposed merger raise concerns for the U.S. Justice Department or Federal Trade Commission?

An years past, firms around the world have secretly engaged in collusive agreements to restrain production and push prices above competitive levels.

Evidence compiled by government officials investigating such agreements has revealed that conspiring firms often utilize similar methods of establishing and enforcing collusive restraints of trade. Most agreements, for instance, assign to each firm an allowed market share, a permitted region of operations, or an approved set of customers. In addition, participating firms commonly are required to exchange sales information so that they can monitor adherence to their agreements to restrain trade. In this chapter, you will learn why firms that typically utilize these techniques to formulate and maintain collusive agreements engage in secret conspiracies: Such agreements are illegal under U.S. antitrust laws.

Identify alternative theories aimed at explaining the behavior of regulators
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