Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 14, Problem 3DQ
To determine
The effects of the price control of regulatory agencies.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
In some regulated industries, regulatory agencies pre-vented prices from falling, and as a result many firms opened for business in those industries. Is this kind of regulation competitive or anticompetitive? Is it a good idea or a bad one?
What is the limitations in market regulation?
What are the objectives of regulators? Under
what conditions is regulation most likely to raise
welfare?
Chapter 14 Solutions
Economics: Principles & Policy
Knowledge Booster
Similar questions
- Given what you know about regulatory capture, can you describe a possible scenario where accusations of restrictive practices ends up limiting competition, rather than extending it?arrow_forwardWhy does regulatory capture reduce the persuasiveness of the case for regulating industries for the benefit of consumers?arrow_forwardSuppose regulators are deciding how the local electric company is allowed to set prices. Demand for electricity is given by P = 40-Q, where Q is millions of megawatt hours demanded annually. The electric company is allowed to operate as a monopoly. The marginal cost of the company is $2, while the fixed cost is $150 million annually. (a) If the price of the electric company was not regulated, what price would it set? What would be its profits and the deadweight loss? (b) Knowing the fixed cost, demand curve, and marginal cost of the utility, the regulator decides to set a linear price that allows the electric utility to break even. What is this price? What would be the deadweight loss? (c) Suppose that demand for electricity varies over the course of the day and is most inelastic in the middle of the day. Illustrate how the regulator could use this information to improve on the outcome in (b)? Would there be any challenges that would prevent regulators from using the prices you…arrow_forward
- Give an example of a government-created monopoly. Is the creation of this monopoly necessarily good or bad public policy?arrow_forwardWriting at least 400 words, give an example of a government-created monopoly. Is creating this monopoly necessarily bad public policy? Explain.arrow_forwardShould the government regulate monopolies? If yes, outline the economic implications and process of regulation.arrow_forward
- If public utilities are a natural monopoly, what would be the danger in deregulating them?arrow_forwardImagine that you are managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10% less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?arrow_forwardThe figure below presents the demand curve, marginal revenue, and marginal costs facing a monopolist. (A monopolist is a producer) Price ($) 55 50 45 40 35 30 25 20 15 10 5 0 1 2 3 4 ATC Quantity MC MR, D 567 8 9 10 11. a. Under monopoly pricing, are profits positive, negative, or zero? (Click to select) b. If government regulates average total cost pricing (P = ATC), are profits positive, negative, or zero? (Click to select) c. If government regulates efficient pricing, are profits positive, negative, or zero? (Click to select) d. Is this a natural monopoly? (Click to select)arrow_forward
- Being the only producer in a monopoly market, can a monopolist charge a very high price to maximize profit? Why, or why not?From a societal point of view, can we claim that perfect competition and monopoly are equally efficient? Why, or why not? Explain.arrow_forwardDeregulation, like all changes in government policy, always has pluses and minuses. What do you think are some of the pluses and minuses for airline deregulation?arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Microeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning