Review Questions

shapes? 7 . From the graph you drew to answer Exercise 11.6, would you say this transit system is a natural monopoly? Justify. Use the following information to answer the next three questions. In the years before wireless phones, when telephone technology required having a wire running to every home, it seemed plausible that telephone service had diminishing average costs and might require regulation like a natural monopoly. For most of the twentieth century, the national U.S. phone company was AT&T, and the company functioned as a regulated monopoly. Think about the deregulation 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 deregulation possible? 9 . What are some of the benefits of the deregulation? 10 . What might some of the negatives of deregulation be?

Review Questions

11 . What is a corporate merger? What is an acquisition? 12 . What is the goal of antitrust policies? 13 . How do we measure a four-firm concentration ratio? 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 “market” is for purposes of measuring competition? 16 . What is a minimum resale price maintenance agreement? How might it reduce competition and when might it be acceptable? 17 . What is exclusive dealing? 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 predatory pricing? How might it reduce competition, and why might it be difficult to tell when it should be illegal? 20 . If public utilities are a natural monopoly, what would be the danger in deregulating them? 21 . If public utilities are a natural monopoly, what would be the danger in splitting them into a number of separate competing firms? 22 . What is cost-plus regulation? 23 . What is price cap regulation? 24 . What is deregulation? 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 four-firm concentration ratio or the HHI directly measure the amount of competition in an