Deck 5: Economic Regulation Which Path: Deregulation or Reregulation

Question 1

Defense of the practice of using commission-directed "cross-subsidy" pricing techniques is most frequently associated with the

A) Liberal paradigm.
B) Conservative paradigm.
C) Radical paradigm.
D) None of the above.

Answer 1

A

Question 2

Liberals contend that the Savings and Loan crisis of the late 1980s best illustrates the failure of

A) regulation.
B) reregulation.
C) deregulation.
D) registration.

Answer 2

C

Question 3

A "natural monopoly" is best described as a

A) monopoly enterprise enjoying continuous economies of scale.
B) firm that dominates a market due to patent protections.
C) firm with few if any public interest characteristics to its products and/or services.
D) any firm controlling 90 percent or more of total industry sales.

Answer 3

A

Question 4

The bailout of Conrail with federal funds could be characterized by "socialism for the rich" because

A) only wealthy people can afford intercity rail travel.
B) Congress sought to nationalize passenger railroads and use the revenues to pay down the deficit.
C) American railroads typically had above-average profitability.
D) Conrail had significantly undervalued assets, which only shareholders stood to realize.

Question 5

Deregulation as a movement

A) began in the 1890s.
B) is mostly supported by Liberal economists.
C) has largely been associated with Republican presidents.
D) has had few successes.

Question 6

From a Conservative perspective, government regulation

A) tends to create monopoly power where it might otherwise not exist.
B) is acceptable to railroads and banks because there are considerable public interest effects.
C) should replace the current deregulation movement.
D) All of the above.
E) None of the above.

Question 7

Which is not an alleged benefit of deregulation offered by its supporters?

A) Falling prices paid by the consumer.
B) The clear articulation of specific public interest objectives.
C) The breakdown of monopoly powers.
D) An encouragement of greater efficiency of formerly regulated firms.
E) An end to "cross-subsidization" and price discrimination.

Question 8

A near classic example of "cross-subsidization" existed in

A) phone rates before AT&T was broken up.
B) the Interstate Commerce Commission habit of permitting railroads to charge more for the short haul than the long haul.
C) allowing savings banks to compete with commercial banks.
D) All of the above.

Question 9

Liberals see deregulation as a

A) clear improvement upon the regulation alternative.
B) return to an irrational era of rate wars and excess capacity.
C) first step toward nationalization.
D) violation of the free-market system.

Question 10

Liberals hold that

A) government regulations are always harmful to consumers.
B) regulation should balance investor and managerial interests.
C) regulation has, on balance, been beneficial to consumers.
D) market freedom is always commensurate with personal freedom.

Question 11

Since the late 1970s, Conservatives claim that the

A) number of operating railroads has increased.
B) nation's public transportation system has been weakened.
C) United States has moved even further from free market ideals.
D) number of operating railroads has declined, but price competition and service have improved.

Question 12

Railroads continue to increase their share of freight traffic.

A) Conservatives see this as a triumph of greater competition within the transportation sector.
B) Liberals claim this is due to lower energy costs.
C) Radicals see this as a result of monopoly pricing.
D) Conservatives, Liberals, and Radicals agree that this is the result of ending the experiment with deregulation.

Question 13

Comparing the United States with European nations

A) Americans tend to support a broader degree of regulation of business.
B) Europeans have historically favored public ownership over regulation in many industrial sectors.
C) the United States has been slow to deregulate.
D) None of the above.

Question 14

Radicals would support which of the following actions to prevent another California electricity crisis?

A) Additional tax subsidies to build nuclear power reactors.
B) Privatization of all public utility companies.
C) A decrease in the top marginal income tax bracket.
D) Government ownership and control of electrical utility companies.

Question 15

The Sarbanes-Oxley Act of 2002 represented

A) deregulation of the financial services industry.
B) increased oversight over corporate financial reporting.
C) telecommunications deregulation.
D) a proposed national ban on cellular phone use while operating a motor vehicle.

Question 16

The powers of the Interstate Commerce Commission were transferred to

A) the Civil Aeronautics Board.
B) the National Highway Transportation Safety Board.
C) a blind trust.
D) the Surface Transportation Board.

Question 17

A local electric utility company is a good example of a firm possessing "natural monopoly" characteristics.

Question 18

The Interstate Commerce Commission was the nation's first serious effort at establishing a federal regulatory commission to oversee an entire industry.

Question 19

With the deregulation of the airlines industry, prices initially fell on short-haul routes and increased on long-haul routes.

Question 20

The savings and loan crisis is attributable to the recent trend toward reregulation.

Question 21

Conservatives find no justification--under any conditions--for government regulation of any private enterprise.

Question 22

According to the Liberal view, certain industries should be required by law and regulation to meet basic public interest standards.

Question 23

There is strong evidence to support the fact that business itself has in the past, and to some extent even presently, supported government regulation.

Question 24

"Universal service" arguments contend that all publicly sought services should be provided free of charge to all potential users.

Question 25

When AT&T was broken up, it became possible to introduce the Liberal supported "cross subsidizing" phone rates.

Question 26

The initial effect of deregulation was to reduce the number of competing firms in the previously regulated industries.

Question 27

Radicals believe that deregulation will, in the long run, have little effect in reducing the monopolistic power of most previously regulated industries.

Question 28

Radicals would agree with Conservatives that transportation regulation has not benefited ordinary consumers.

Question 29

Under the 4-R Act, Conrail was created to run the bankrupt eastern railroads, with the aim of eventually making them privately owned and operated business enterprises.

Question 30

Railroads are what economists call a "natural monopoly."

Question 31

According to both Liberals and Radicals, regulation worked out but deregulation has failed.

Question 32

Conservatives argue that California's energy crisis can best be solved by price-gouging consumers.

Question 33

The deregulation of the Savings and Loan industry in the 1980s reduced their interest costs.