Reading 15: Regulation and Antitrust Policy in a Globalized Economy

LOS a: Discuss the objectives of regulation and the concepts of cost-of-service regulation and rate-of-return regulation.

1.In the United States, the restaurant industry is quite competitive, with a large number of competitors each with a sizeable amount of market share. This industry is best described as:

A)   a natural monopoly, with governmental regulation necessary to ensure the quality of production.

B)   a competitive industry that is subject to social regulation because of the impact of its production on society.

C)   an inherently competitive industry, which currently does not warrant heavy government regulation.

D)   a deregulated industry, which does not require heavy government regulation because of its low barriers to entry and exit.

The correct answer was C)

The industry has several large players with sizeable market share, and currently does not have any one dominant producer. It does have relatively low barriers to entry and exit, but is not a deregulated industry because that implies that it had regulations that were lifted.