Exam 13: Limiting Market Power: Regulation and Antitrust

Many industries are regulated in the United States, from railroads and electric utilities to cable TV.

A concentration ratio provides a better assessment of market power than the Herfindahl-Hirschman index does.

The antitrust laws are enforced by government agencies such as the Federal Trade Commission and the Department of Justice.

Economies of scale tend to create natural monopolies.

What does the Herfindahl-Hirschman Index value near zero imply about the market?

A home appliances supplier offers substantial discounts to customers if they buy several of the firm's products.When bought together, these items cost considerably less than the sum of the prices of the items if they were bought separately.Which pricing arrangement is being discussed here?

Market power allows firms to raise prices significantly above the competitive level.

Economies of scale and scope encourage free competition.

If there are strong economies of scale and scope, then society

One of the clear effects of deregulation was

For the two industries with market shares listed below, which of the following would be true?

Monopolies may be the only firms large enough to commercially produce a significantly innovative new product.

While monopoly power can be abused, it can also be used beneficially.What are the major pros and cons of largeness in business?

The Antitrust Division of the Department of Justice carefully scrutinizes mergers.Why?

The concentration ratio of industry is a measure relating to the proportion of the industry's total output that is produced by a small number of firms.

What are the reasons that are usually given to justify regulation?

The "universal service" argument often requires that some products be sold at a loss while other products be sold at profits higher than normal.

What is defined as the ability of a firm to earn high profits by raising and keeping the prices of its products substantially above the levels at which those products would be priced in competitive markets?

Airline deregulation has led to: (i) lower prices; (ii) a deterioration of service to isolated communities.

Selling at a price that is only slightly above the firm's cost of production is called predatory pricing.