Exam 17: Competition Policy

Describe the two problems that arise when regulators impose marginal-cost pricing on a natural monopoly.

When regulating a monopoly, one of the problems with setting price equal to average cost is that:

The argument that consumers will not be willing to pay any more for two items sold as one than they would for the two items sold separately is used to justify the legality of which of the following?

No deadweight losses will result if regulators allow a natural monopolist to price at average total cost.

Reduced competition through merging of companies:

As the number of sellers in an oligopoly grows, an oligopolistic market looks less and less like a competitive market.

When Internet cabinets were no longer under the control of a single company, meant that Internet access from the wholesaler is now open to competition, this is an example of:

The information obtained from a retail outlet can be considered a:

Which of the following measures may eliminate some of the inefficiency that results from monopoly pricing?

What is the rationale for transparent pricing and why is it unlikely to improve competition?

Suppose an airline sells its tickets at an artificially low price in order to force an efficient competitor out of the market and thus reduce long run competition. This firm has adopted:

If Canon were to require every store that carried its cameras to charge customers 20 per cent more than the store's cost for each camera, Canon would be practising:

In many countries, the government chooses to 'internalise' the monopoly by owning monopoly providers of goods and services. (In some cases these firms are 'nationalised' and the government actually buys or confiscates firms that operate in monopoly markets.) What would be the advantages and disadvantages of such an approach to ensuring that the 'best interest of society' is promoted in these markets? Carefully explain your answer.

A local bank sells two services, cheque accounts and ATM card services. Mr Donethat is willing to pay $8 a month for the bank to service his cheque account and $2 a month for unlimited use of his ATM card. Ms Beenthere is willing to pay only $5 for a cheque account but is willing to pay $9 for unlimited use of her ATM card. To keep this example simple, assume that the bank can provide each of these services at zero marginal cost. -The practice of a producer requiring that retailers charge a price for its products that is set by the producer is called:

Suppose Apple Computers has entered into an enforceable resale price maintenance agreement with Computer Super Stores Inc. (CSS Inc.) and Wal-Mart. Which of the following will always be true?

Economists generally agree that transparent pricing increases incentives for cartel members to cheat.

In 2004, the ACCC successfully prosecuted a number of petrol sellers in a Victorian town for collusion. The petrol sellers advertised their prices on boards outside their petrol stations. When one of the sellers wanted to raise petrol prices in the town, they would increase the price on their own board and then ring the other sellers to suggest that they 'go for a drive'. This is an example of the cost of:

If regulators set price equal to marginal cost, then a natural monopolist will earn exactly zero profit.

Which of the following is false of limiting a firm's behaviour through competition laws?

Why is doing nothing sometimes considered an appropriate strategy to deal with monopoly?