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Chapter 27: Q.a - For Critical Thinking (page 602)
Who pays for the many hours of work that numerous officials of agencies such as the Consumer Product Safety Commission devote to establishing new regulations?
The government pays for the numerous officials of agencies such as the Consumer Product Safety Commission
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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.
Recognize the practical difficulties in regulating the prices charged by natural monopolies
The table below depicts the cost and demand structure a natural monopoly faces.
a. Calculate total revenues, marginal revenue, and marginal cost at each output level. If this firm is allowed to operate as a monopolist, what will be the quantity produced and the price charged by the firm? What will be the amount of monopoly profit? [Hint: Recall that marginal revenue equals the change in total revenues from each additional unit and that marginal cost equals the change in total costs from each additional unit.]
b. If regulators require the firm to practice marginal cost pricing, what quantity will it produce, and what price will it charge? What is the firm's profit under this regulatory framework? [Hint: Recall that average total cost equals total cost divided by quantity and that profits equal .
c. If regulators require the firm to practice average cost pricing, what quantity will it produce, and what price will it charge? What is the firm's profit under this regulatory framework?
A bank in Austin, Texas, has allowed its state banking license, under which it had been regulated by the Federal Deposit Insurance Corporation, a U.S. bank regulator, to expire. It has switched to a federal banking license, under which it is now regulated by the Office of the Comptroller of the Currency, another bank regulator. Do these regulators subject the bank to social or economic regulation?
Why do you think that many firms with lengthy truck routes now try to recruit married couples to drive their trucks?
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.
Understand the foundations of antitrust regulations and enforcement
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