Exam 17: Competition Policy

If Sony was to require all stores carrying their cameras to sell at the recommended retail price Sony sets, rather than allow the stores to set their own prices, then Sony would be practicing predatory pricing.

One solution to the problems of marginal-cost pricing of a regulated monopolist is average-cost pricing. In this model, the monopolist is allowed to price its production at average total cost. How does average-cost pricing differ from marginal-cost pricing? Does this solution maximise social wellbeing?

A legitimate business reason for companies to merge is not to reduce competition but to:

Although predatory pricing is a common claim in trade practices suits, some economists are skeptical about this argument because they believe that:

Which of the following is necessarily a problem with competition laws?

The key issue in determining the efficiency of public versus private ownership of a monopoly is:

Resale price maintenance may not be anti-competitive if:

Some companies merge, not to reduce competition but to lower costs through more efficient production.

Predatory pricing occurs when a firm:

If market failure from monopoly behaviour is deemed small compared to the inevitable imperfections of policies, policymakers may choose to:

To move the allocation of resources closer to the social optimum, policymakers should typically try to induce firms in an oligopoly to cooperate rather than compete with each other.

The practice of tying is used to:

Average cost pricing always guarantees that the monopolist earns zero economic profits but does not ensure a socially optimal market solution.

Regulated natural monopolies typically have rising average costs.

If a manufacturer does not exercise retail price maintenance, a free-rider problem may become evident among retailers and ultimately lead to lower profits for the manufacturer.

Some shops may provide a lot of information to a customer at a high cost to the store. If the customer then buys the product cheaper from a different store that does not provide this information, a free-rider problem emerges. A possible solution to this problem is:

Privatisation of a government-owned asset could reduce future earnings to the country.

In New Zealand, the telephone lines (and cabinets) have been unbundled recently. Explain what this means in regards to tying and discuss why it is beneficial for social outcomes.

The business practice of tying is also referred to as:

An important benefit of private ownership of a monopoly is that a private monopoly has more incentive to: