Question 1

Suppose that all the auto repair shops in an isolated town agree to increase the price of their services.Is this illegal? Why?

Accepted Answer

The answer of Suppose that all the auto repair shops...

Question 2

Some consider the local cable industry to be a natural monopoly.If the cable industry is under incentive regulation,what would be the effect of introducing competitive satellite TV? What should the cable regulatory agency do?

Accepted Answer

The answer of Some consider the local cable industry to...

Question 3

Deregulation of an industry is applied mainly to increase market competition.

Accepted Answer

Deregulation removes restrictions and regulations that can limit competition, which can lead to increased competition in the industry.

Question 4

Section 2 of the Sherman Antitrust Act is being used to sue companies for predatory pricing.What is predatory pricing? Why is prosecuting predatory pricing part of competition policy?

Accepted Answer

The answer of Section 2 of the Sherman Antitrust Act...

Question 5

Should the government try to prevent a merger that would enable the resultant firm to produce at a more efficient scale of production?

Accepted Answer

The answer of Should the government try to prevent a...

Question 6

It has been suggested that it is always worth regulating a monopoly if doing so reduces the amount of deadweight loss.Comment.

Accepted Answer

The answer of It has been suggested that it is...

Question 7

The table below shows the market shares of three industries.  Use the FTC merger guidelines to determine whether the following changes in the industries would be permitted:
(A)Eight firms merge into one firm in industry A
(B)The largest firm merges with one of the smallest firm in industry B
(C)Three firms merge into one firm in industry C

Accepted Answer

The answer of The table below shows the market shares...

Question 8

Given that increased market power results in deadweight loss,should government policy be designed to inhibit firms from gaining market power?

Accepted Answer

The answer of Given that increased market power results in...

Question 9

Draw a diagram for a firm in an industry in which the fixed costs are high and the marginal cost is low and constant.
(A)Would you expect to find many firms in this industry? Explain.
(B)Show that a firm in this industry is not producing efficiently.
(C)In this example,should regulators require this type of firm to produce at the level at which price equals marginal cost? Why? What types of regulation would enable the firm to produce at a more efficient level of output and yet stay viable in the long run?

Accepted Answer

The answer of Draw a diagram for a firm in...

Question 10

After the increased regulation of the cable industry in 1993,many cable systems were allowed to raise prices.Give some possible explanations for this situation.If the provision of cable TV is not a natural monopoly,what could be expected regarding the number of firms and the profits of existing firms if the government deregulates?

Accepted Answer

The answer of After the increased regulation of the cable...

Question 11

The demand schedule and total costs for a natural monopoly are given in the table below.  (A)Calculate marginal revenue,marginal cost,and average total cost.
(B)Why is this firm a natural monopoly?
(C)Determine the monopoly price and quantity.
(D)Suppose the government decides to regulate this natural monopoly.If the regulators use average cost pricing,what will be the price and quantity of production?
(E)If regulators use marginal cost pricing,what will be the price and quantity of production? What will be profits under marginal cost pricing?

Accepted Answer

The answer of The demand schedule and total costs for...

Question 12

The table below shows the market shares of firms in three different industries.  (A)Complete the table by calculating the Herfindahl-Hirschman index for each industry.
(B)Will the FTC try to prevent a significant merger in industry A? In industry B? In industry C? Why?

Accepted Answer