Exam 21: Understanding the Business Environment: The Economics of Regulation

In the 1980s, "voluntary restrictions" on automobile imports raised prices of Japanese cars $1,000, European cars by $2,000 and American cars by $500. During the period following these restrictions, both Japanese and European automakers opened parts and assembly plants in the US. Why did this happen? How is it related to regulation?

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Question 1

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The threat of government regulation led foreign car manufactures to restrict the number of cars they imported in order to prevent even stricter import quotas or large tariffs. The opening of new auto plants in the US by Japanese and European automakers allows these firms to produce cars that would not be affected by trade barriers. The opening of these plants within the United States may also increase political support for these companies' preferred policies including lower trade barriers for imported cars.

Describe the lemons problem.

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Question 2

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Suppose the going rate for 1-year old cars is $20,000, and you have a 1-year old car in perfect condition, which is technically worth more than $20,000 because its quality is better than an average 1-year old car. But you may not be able to convince a potential buyer regarding this aspect. Thus you will end up holding on to the car. A potential trade has failed and this is called a market failure, due to qualitative uncertainty.

If property rights are enforced and contracts in trade are legally respected, it is usually assumed that:

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Question 3

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Draw a profit/price tradeoff curve that is the result of moving from a competitive to a monopoly industry organization. Show the equilibrium position for the regulator with a political support function (PS curve). What can we say about prices and profits of the regulated industry if it started as a competitive industry?

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Question 4

Average wealth loss per firms from litigation amounts to about ___________.

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Question 5

Alternative Dispute Resolution (ADR) is used to:

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Question 6

As an industry moves from competitive to monopolistic prices:

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Question 7

In parts of Eastern Europe, companies maintain special guards to protect payday funds, to help move products to market, and to enforce immediate payment for products sold to retailers. All of these features indicate:

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Question 8

In 2003, conservation groups paid western cattlemen to move their herds away from wild buffalo herds so that the buffalo would have more feed and not have to compete with the cattle. What has this got to do with regulation and the Coase Theorem?

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Question 9

Informational deficits of producers or consumers, plus problems of externalities, can:

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Question 10

Between 1971 and 1991, more than _________ federal lawsuits were filed.

(Multiple Choice)

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Question 11

Environmental Protection Agency (EPA) regulations tend to go through many stages of review and approval before they are implemented. Not only do many regulators have to approve a new regulation, but comments and reviews from industry and conservation organizations are typical. Explain these complicated procedures in light of the theories of supply and demand for regulation.

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Question 12

A person buys a used 1998 Honda Civic and finds that there is a problem in the drive train so that the whole set of axles must be replaced. However, the state has a lemon law that protects the buyer from these kinds of discoveries for 30 days. These lemon laws attempt to correct for the problem of:

(Multiple Choice)

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Question 13

Special interest groups, in the theory of regulation, may be defined as:

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Question 14

A jury ordered McDonald's to pay $2.7 million to Stella Liebeck, a drive-through customer who burned herself with hot coffee after placing the cup between her legs to remove the top and add cream: she claimed that the coffee was too hot. This tells us the our legal system can:

(Multiple Choice)

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Question 15

The transactions costs of writing and enforcing contracts are higher in:

(Multiple Choice)

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Question 16

In some industries, pollution rights are sold from one company that does not need them to another that does. In recent years, conservation groups have purchased pollution rights so they cannot be exercised. Companies in need of pollution rights would find that:

(Multiple Choice)

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Question 17

Draw a profit/price tradeoff curve that results from moving from a competitive to a monopoly industry organization. Show the equilibrium position for the regulator with a political support function (PS curve). What can we say about prices and profits of the regulated industry if it started as a monopoly?

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Question 18

Explain how Coase's theorem is implemented by the EPA.

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Question 19

The 1890 Sherman Act was legislated by the:

(Multiple Choice)

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Question 20

Showing 1 - 20 of 40

Describe the lemons problem.

If property rights are enforced and contracts in trade are legally respected, it is usually assumed that:

Average wealth loss per firms from litigation amounts to about ___________.

Alternative Dispute Resolution (ADR) is used to:

As an industry moves from competitive to monopolistic prices:

In parts of Eastern Europe, companies maintain special guards to protect payday funds, to help move products to market, and to enforce immediate payment for products sold to retailers. All of these features indicate:

In 2003, conservation groups paid western cattlemen to move their herds away from wild buffalo herds so that the buffalo would have more feed and not have to compete with the cattle. What has this got to do with regulation and the Coase Theorem?

Informational deficits of producers or consumers, plus problems of externalities, can:

Between 1971 and 1991, more than _________ federal lawsuits were filed.

A person buys a used 1998 Honda Civic and finds that there is a problem in the drive train so that the whole set of axles must be replaced. However, the state has a lemon law that protects the buyer from these kinds of discoveries for 30 days. These lemon laws attempt to correct for the problem of:

Special interest groups, in the theory of regulation, may be defined as:

A jury ordered McDonald's to pay $2.7 million to Stella Liebeck, a drive-through customer who burned herself with hot coffee after placing the cup between her legs to remove the top and add cream: she claimed that the coffee was too hot. This tells us the our legal system can:

The transactions costs of writing and enforcing contracts are higher in:

In some industries, pollution rights are sold from one company that does not need them to another that does. In recent years, conservation groups have purchased pollution rights so they cannot be exercised. Companies in need of pollution rights would find that:

Explain how Coase's theorem is implemented by the EPA.

The 1890 Sherman Act was legislated by the:

Introduction

Economists View of Behavior

Markets, Organizations, and the Role of Knowledge

Demand

Production and Cost

Market Structure

Pricing With Market Power

Economics of Strategy: Creating and Capturing Value

Economics of Strategy: Game Theory

Incentive Conflicts and Contracts

Organizational Architecture

Decision Rights: The Level of Empowerment

Decision Rights: Bundling Tasks Into Jobs and Subunits

Attracting and Retaining Qualified Employees

Incentive Compensation

Individual Performance Evaluation

Divisional Performance Evaluation

Corporate Governance

Vertical Integration and Outsourcing

Leadership: Motivating Change Within Organizations

Ethics and Organizational Architecture

Organizational Architecture and the Process of Management Innovation

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