Critical Thinking Questions
shapes? 7 . From the graph you drew to answer Exercise 11.6, would you say this transit system is a ? Justify. Use the following information to answer the next three questions. In the years before wireless phones, when telephone required having a wire running to every home, it seemed plausible that telephone had diminishing average costs and might require regulation like a . For most of the twentieth century, the national U.S. phone company was AT&T, and the company functioned as a regulated . Think about the of the U.S. telecommunications industry that has occurred over the last few decades. (This is not a research assignment, but a thought assignment based on what you have learned in this chapter.) 8 . What real-world changes made the possible? 9 . What are some of the benefits of the ? 10 . What might some of the negatives of be?
Review Questions
11 . What is a corporate ? What is an ? 12 . What is the goal of antitrust policies? 13 . How do we measure a ? What does a high measure mean about the extent of competition? 14 . How do we measure a Herfindahl-Hirschman Index? What does a low measure mean about the extent of competition? 15 . Why can it be difficult to decide what a “” is for purposes of measuring competition? 16 . What is a minimum resale maintenance agreement? How might it reduce competition and when might it be acceptable? 17 . What is ? How might it reduce competition and when might it be acceptable? 18 . What is a tie-in sale? How might it reduce competition and when might it be acceptable? 19 . What is ? How might it reduce competition, and why might it be difficult to tell when it should be illegal? 20 . If public utilities are a , what would be the danger in deregulating them? 21 . If public utilities are a , what would be the danger in splitting them into a number of separate competing firms? 22 . What is ? 23 . What is ? 24 . What is ? Name some industries that have been deregulated in the United States. 25 . What is regulatory capture? 26 . Why does regulatory capture reduce the persuasiveness of the case for regulating industries for the benefit of consumers?
Critical Thinking Questions
27 . Does either the or the HHI directly measure the amount of competition in an industry? Why or why not? 28 . What would be evidence of serious competition between firms in an industry? Can you identify two highly competitive industries? 29 . Can you think of any examples of successful in the real world? 30 . If you were developing a product (like a web browser) for a with significant , how would you try to get your product into the successfully? 31 . In the middle of the twentieth century, major U.S. cities had multiple competing city bus companies. Today, there is usually only one and it runs as a subsidized, regulated . What do you suppose caused the change? 32 . Why are urban areas willing to subsidize urban transit systems? Does the argument for subsidies make sense to you? 33 . , like all changes in government policy, always has pluses and minuses. What do you think some of the minuses might be for airline ? 34 . Do you think it is possible for government to outlaw everything that businesses could do wrong? If so, why does government not do that? If not, how can regulation stay ahead of rogue businesses that push the limits of the system until it breaks?
Problems
35 . Use to calculate the for the U.S. auto . Does this indicate a concentrated or not? GM 19% Ford 17% Toyota 14% Chrysler 11% TABLE 11.5 Global Auto Manufacturers with Top Four U.S. , June 2013(Source: http://www.zacks.com/ commentary/ 27690/auto- industry-stock- outlook- june-2013) 36 . Use and to calculate the Herfindahl-Hirschman Index for the U.S. auto . Would the FTC approve a between GM and Ford?
Text from Principles of Microeconomics 3e, OpenStax, licensed CC BY-NC-SA 4.0. Access for free at openstax.org.
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