Deck 13: Regulation

Question 1

Under rate of return regulation, what must the regulator stipulate?

A) Minimum rate of return and maximum allowed rate base.
B) Maximum rate of return and maximum allowed rate base.
C) Minimum rate of return and minimum allowed rate base.
D) Maximum rate of return and minimum allowed rate base.

Answer 1

B

Question 2

Explain structural regulation of monopoly power.

Answer 2

Under structural regulation, the regulator stipulates the conditions under which a business may produce vertically related goods and services (to separate the natural monopoly from the potentially competitive market).

Question 3

What does competition law seek to do?

A) Prohibit collusion.
B) Prohibit abuse of monopoly power.
C) Prohibit mergers that create substantial market power.
D) a and b.
E) a, b, and c.

Answer 3

E

Question 4

Why might it be better for a hospital to pay physicians an hourly wage rather than by the revenue that they generate from treating patients?

A) Encourages physicians to reduce their effort (which the employer cannot observe).
B) Discourages physicians from excessive treatment.
C) Increases the risk on physicians.
D) Both a and c.
E) Both b and c.

Question 5

The Singapore government requires financial advisors to disclose all material information, including risks and returns, fees and charges, as well as restrictions on withdrawal. What does such regulation aim to achieve?

A) Regulation of conduct and disclosure.
B) To protect consumers from financial advisors selling excessively risky products that do not fit the consumer's risk profile.
C) a and b.
D) Neither a nor b.

Question 6

Explain how to regulate aircraft noise through a standard.

A) Charge aircraft a fee for any level of noise emissions.
B) Prohibit aircraft from emitting noise exceeding the standard.
C) Require all aircraft to be tested for noise emissions.
D) All of the above.

Question 7

How would a tax on carbon emissions increase economic efficiency?

A) Reduce emissions to the level where the lowest marginal benefit equals the marginal social cost.
B) Reduce emissions to the level where the highest marginal benefit equals the marginal social cost.
C) Reduce emissions to the level where the average marginal benefit equals the marginal social cost.
D) Reduce emissions to the level where all marginal benefits equal the marginal social cost.

Question 8

How would the sunk-cost fallacy impede policies to reduce carbon emissions?

A) Businesses would not want to invest in equipment and facilities that become sunk costs.
B) Businesses would be reluctant to change their existing methods of production.
C) Businesses tend to over-weight the present relative to the future.
D) None of the above.

Question 9

Why should "cap and trade" schemes to regulate carbon emissions be extended from within countries to allow trade among countries?

A) The marginal benefit of emissions may differ across countries.
B) To equalize the marginal benefit of emissions across countries.
C) The marginal cost of emissions may differ across countries.
D) a and b.
E) b and c.

Question 10

Why should the management of a tunnel charge a toll to users?

A) Users may differ in their marginal benefit.
B) Users may differ in their marginal cost.
C) To force users to internalize the marginal cost of congestion.
D) To equalize the marginal benefit across users.

Question 11

Explain rate of return regulation.

Question 12

Explain structural regulation of monopoly power.

Question 13

Why might it be better for a hospital to pay physicians an hourly wage rather than by the revenue that they generate from treating patients?

Question 14

The Singapore government requires financial advisors to disclose all material information, including risks and returns, fees and charges, as well as restrictions on withdrawal. What is the purpose of this regulation?

Question 15

Explain how to regulate aircraft noise through a standard.

Question 16

How would a tax on carbon emissions increase economic efficiency?

Question 17

How would the sunk-cost fallacy impede policies to reduce carbon emissions?

Question 18

Why should "cap and trade" schemes to regulate carbon emissions be extended from within countries to allow trade among countries?

Question 19

Why should the management of a tunnel charge a toll to users?