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The two basic types of government regulation are
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social regulation and economic regulation.
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Which type of regulation applies to all firms in the economy, as opposed to only covering specific industries?
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Social regulation
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If a public service commission requires a natural monopoly to set its price equal to the long-run marginal cost, this will result in
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losses to the monopoly.
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For a natural monopoly, long-run average costs
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fall as output increases.
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An unregulated natural monopolist would produce to the point at which
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MR = MC.
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A natural monopoly that is not regulated will choose to produce at the
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point at which marginal revenue equals marginal cost.
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The primary purpose of economic regulation of an industry is to
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control the prices charged by the regulated industry.
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If government regulators make the natural monopolist set price equal to marginal cost
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the natural monopolist will make losses and go out of business.
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When consumers have less information about a product than do sellers, then this is the situation of
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asymmetric information.
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The main rationale for government regulatory functions is
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to protect consumer interests.
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During the production process Ajax Corporation releases pollution into the air. Ajax Corporation operates in a monopolistic competitive industry. Which of the following statements addresses the pollution situation?
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This is an example of a market failure and is a reason for the government to regulate the industry.
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A firm that responds to a regulatory rule in a way that permits technical compliance while allowing the firm to violate the spirit of the regulation has.
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engaged in a creative response to regulation.
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According to the text, the federal government spends the most taxpayer-provided funds regulating which area of the economy?
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Transportation
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A potential benefit that comes from social regulations would be
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a cleaner environment.
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Which of the following refers to the capture hypothesis of regulation?
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The control of regulatory agencies by firms in an industry
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The behavior of regulators when trying to win approval for their actions from their entire constituency is best described by the
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share-the-gains, share-the-pains hypothesis.
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The first major law created to control the growth of monopoly power was the
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Sherman Act.
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The regulatory agency most concerned with false advertising is the
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Federal Trade Commission.
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The idea behind antitrust legislation is to
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promote competition in the market.
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The primary measure of monopoly power is
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the market share test.
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