ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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"I'm About to Lose You"
The wireless industry ranks among the bottom five businesses in the American Customer Satisfaction Index. Critics say that the wireless industry has become a cozy
cartel of a few dominant providers. They point to several unfair practices: high termination fees; costly to switch providers; handsets that only work with a single carrier;
and limited access to Web sites. Now Washington is listening.
Source: Newsweek, August 6, 2007
If it were costless to switch providers, explain what changes would occur in the wireless market. Would there be a role for Washington?
If it were costless to switch providers,
O A. more providers would enter the industry and the price would fall. The fall in price would decrease demand for smartphones. Washington would not need to
interfere
O B. providers would be even more diligent at maintaining the same high price, and Washington would be forced to police the industry to ensure that antitrust laws
are not broken
O C. consumers would switch to the provider with the lowest price, the market would become competitive, and there would be no role for Washington
O D. consumers would switch to the provider with the lowest price, a price war would break out, and most firms would go bankrupt and leave the industry. The
remaining firms would form another cartel and raise the price back to the monopoly level. Washington would be required to implement new regulations
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Transcribed Image Text:"I'm About to Lose You" The wireless industry ranks among the bottom five businesses in the American Customer Satisfaction Index. Critics say that the wireless industry has become a cozy cartel of a few dominant providers. They point to several unfair practices: high termination fees; costly to switch providers; handsets that only work with a single carrier; and limited access to Web sites. Now Washington is listening. Source: Newsweek, August 6, 2007 If it were costless to switch providers, explain what changes would occur in the wireless market. Would there be a role for Washington? If it were costless to switch providers, O A. more providers would enter the industry and the price would fall. The fall in price would decrease demand for smartphones. Washington would not need to interfere O B. providers would be even more diligent at maintaining the same high price, and Washington would be forced to police the industry to ensure that antitrust laws are not broken O C. consumers would switch to the provider with the lowest price, the market would become competitive, and there would be no role for Washington O D. consumers would switch to the provider with the lowest price, a price war would break out, and most firms would go bankrupt and leave the industry. The remaining firms would form another cartel and raise the price back to the monopoly level. Washington would be required to implement new regulations
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