1 Describe three types of government regulation of business
1. (Government Regulations) Describe the three types of government regulation of business. Which two are discussed at length in this chapter?
2. (Business Behavior and Public Policy) Define market power, and then discuss the rationale for government regulation of firms with market power.
2 Evaluate alternative ways government can regulate a natural monopoly
3. (Regulating Natural Monopolies) The following graph represents a natural monopoly.
a. Why is this firm considered a natural monopoly?
b. If the firm is unregulated, what price and output would maximize its profit? What would be its profit or loss?
c. If a regulatory commission establishes a price with the goal of achieving allocative efficiency, what would be the price and output? What would be the firm's profit or loss?
d. If a regulatory commission establishes a price with the goal of allowing the firm a normal profit, what would be the price and output? What would be the firm's profit or loss?
e. Which one of the prices in parts (b), (c), and (d) maximizes consumer surplus? What problem, if any, occurs at this price?
3 Describe two alternative theories of economic regulation
4. (Theories of Regulation) Why do producers have more interest in government regulations than consumers do?
a. Compare and contrast the public-interest and special-interest theories of economic regulation. What is the capture theory of regulation?
b. Which theory of regulation explains why the massive fraud of Bernie Madoff went undetected for years?
5. (Origins of Antitrust Policy) Identify the type of anticompetitive behavior illustrated by each of the following:
a. A university requires buyers of season tickets for its basketball games to buy season tickets for its football games as well.
b. Dairies that bid on contracts to supply milk to school districts collude to increase what they charge.
c. The same individual serves on the boards of directors of Gen-eral Motors and Ford.
d. A large retailer sells merchandise below cost in certain regions to drive competitors out of business.
e. A producer of soft drinks sells to a retailer only if the retailer agrees not to buy from the producer's major competitor.
4 Summarize the driving causes behind each of the four U.S. merger waves
6. (U.S. Merger Waves) Identify the four U.S. merger waves and explain the driving force behind each.
7. (Mergers and Public Policy) Calculate the Herfindahl-Hirschman Index (HHI) for each of the following industries. Which industry is the most concentrated?
a. An industry with five firms that have the following market shares: 50 percent, 30 percent, 10 percent, 5 percent, and 5 percent
b. An industry with five firms that have the following market shares: 60 percent, 20 percent, 10 percent, 5 percent, and 5 percent
c. An industry with five firms, each of which has a 20 percent market share
5 Evaluate whether the U.S. economy has become more competitive or less competitive since 1958, and explain why
8. (Competitive Trends in the U.S. Economy) William Shepherd's research of U.S. industries showed a clear trend in the competitiveness of the U.S. economy between 1958 and 2000. Is the economy growing more or less competitive, and how did Shepherd explain this trend?