Why are the prices of some regulated industries often higher than they would be if there were no regulation?
What will be an ideal response?
Regulators are often concerned to prevent the failure of firms in an industry. In order to prevent bankruptcy, prices may be raised above competitive levels. If a firm is not responsive to customers, or does not innovate or produce efficiently, it may still earn a profit because the regulatory agency protects it from paying the market price of its failure. The agency is more concerned in this case with maintaining firms than with efficiency and promoting consumer utility.
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In perfect competition, the
A) market demand for the good or service is large relative to the minimum efficient scale of a single producer. B) market demand for the good or service is small relative to the minimum efficient scale of a single producer. C) market demand for the good or service can be small relative to the minimum efficient scale of a single producer as long as the goods or services are not identical. D) size of the market demand for the good or service relative to the minimum efficient scale of a single producer does not affect competition.
A coupon bond has an annual coupon of $75, a par value of $1000, and a market price of $900. Its current yield equals
A) 7.50%. B) 8.33%. C) its yield to maturity. D) Not enough information has been provided to calculate the current yield for this bond.
During this century, court decisions on antitrust have
a. changed from per se, to rule of reason, and back to per se b. changed from rule of reason, to per se, and back to rule of reason c. always emphasized per se d. always emphasized rule of reason e. varied from judge to judge without following any pattern
Speculators play a role in the economy similar to that played by
a. farmers. b. investment banks. c. insurance companies. d. stockbrokers.