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