Business_Behavior_and_Public_Policy

1. (Business Behavior and Public Policy) Define market power, and then discuss the rationale for government regulation of firms with market power. In economics, market power is the ability of a firm to alter the market price of a good or service. In perfectly competitive markets, market participants have no market power. A firm with market power can raise prices without losing its customers to competitors. Market participants that have market power are therefore sometimes referred to as "price makers," while those without are sometimes called "price takers." Labor economists have suggested that employee earnings may be relatively higher in firms possessing market power, such as that which may stem from government regulation of prices or entry of firms. We test this hypothesis, which previously has been investigated in the context of industries such as trucking and air transportation, using earnings data for the cable television industry. Our empirical findings suggest that cable TV employees capture some of the benefits producers receive from regulations restricting competition. 2. (Theories of Regulation) Why do producers have more interest in government regulations than consumers do' Standards are a fundamental part of our daily lives for a multitude of reasons. They open channels of communication and commerce, promote understanding of products, ensure compatibility, enable mass production, and most importantly they form the basis of achieving health, safety, and a higher quality of life. It is against they have to follow regulation of the government. The consumer just buys stuffs whenever they want, but producer can’t. The government regulates the rule and they must be followed their orders. (a) Compare and contrast the public-interest and special-interest theories of economic regulation. What is the “capture theory” of regulation'   Term capture theory of regulation Definition: Control of a regulatory agency by those entities, usually the businesses of a particular industry, that the agency is designed to regulate. Those industries subject to economic regulation that is intended to protect the public interest (consumers) invariably find it beneficial to exert influence over the regulatory agency. One common way of doing this is to have former or future employees in the industry "temporarily" work for the regulatory agency (b) Which of these theories best describes the case of airline deregulation'  Which best explains the government’s case against Microsoft' I think its monopoly or market power, not the government power. They have separate rules between market and government. Sometimes, its combined otherwise its separate. 3. (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 General Motors and Ford. d.   A large retailer sells merchandise below cost in certain regions to drive competitors out of business. The answer is D 4.  (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. The answer is B 5. (Regulating a Natural Monopoly) What is the “regulatory dilemma”' That is, what trade-offs do regulators have to consider when deciding how to control a natural monopoly' = Self-regulation is an implicit but important tenet of liberal democratic capitalism. 6. Consumers now treat air travel like a commodity, and meals on some airlines are nonexistent. Does this mean that consumers have suffered because of airline deregulation' Neither airlines nor people get suffered. Because airline makes lower cost to produce to people have fun trip. In this case, the people knew about how and why this airline serves cheap commodity. The airline serves as well as ordinary airlines. The airline makes balance in their income and got effects of low cost commodity. And people can buy their meals when they are flying. It is not deregulation. 7. Do you support the idea of regulating financial sector' Why' Why not' Briefly discuss. Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system. This may be handled by either a government or non-government organization.