1.(Government Regulation) What three types of government policies are used to al
ID: 1251869 • Letter: 1
Question
1.(Government Regulation) What three types of government policies are used to alter or control firm behavior?Determine which type of regulation is used for each of the following:
a. Preventing a merger that the government believes would lessen competition
b. The activities of the Food and Drug Administration
c. Regulation of fares charged by a municipal bus company
d. Occupational safety and health regulations that affect working conditions
(Regulating Natural Monopolies) The following graph represents a natural monopoly.
a. Why is this firm considered a natural monopoly?
b. If the firm is unregulated, what price and output would maximize its profit? What would be its profit or loss?
c. If a regulatory commission establishes a price with the goal of achieving allocative efficiency, what would be the price and output? What would be the
firm’s profit or loss?
d. If a regulatory commission establishes a price with the goal of allowing the firm a “fair return,” what would be the price and output? What would be the
firm’s profit or loss?
e. Which one of the prices in parts b, c, and d maximizes consumer surplus? What problem, if any, occurs at this price
Explanation / Answer
1.(Government Regulation) What three types of government policies are used to alter or control firm behavior?
The government-established, government-run Federal Trade Commission (FTC) uses (1) anti-monopoly and anti-trust policies to stop monopolies and ensure genuine competition; (2) protecting consumers from unfair practices like unfair and misleading advertisement, usually via legislation-based regulations; (3) stopping firms from price-gouging if the firms are the only producers of a particular good in a given area.
The FTC regulates all interstate trade and business; intrastate regulation is left to individual states.
Determine which type of regulation is used for each of the following:
a. Preventing a merger that the government believes would lessen competition
Anti-monopoly regulations; most come from the Sherman (1890) & Clayton (1914) Anti-Trust Acts, as well as from the New Deal's SEC and FTC "rules" and "regulations."
b. The activities of the Food and Drug Administration The FDA is self-regulatory.
c. Regulation of fares charged by a municipal bus company The FTC (see (3) above)
d. Occupational safety and health regulations that affect working conditions Mostly legislation that is founded in the New Deal; the FTC uses this legislation to impose work standards. However, regulations also sometimes come from the Food & Drug Administation (i.e. regulations for the kind of food that can be served in a hospital cafeteria)
(Regulating Natural Monopolies) The following graph represents a natural monopoly. There is no graph, but Cramster only allows one question per post - so repost this as another question with the graph and I'll be sure to answer it!
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.