Q1. Which of the following statements most accurately describes a benefit of deregulation?

A)   The removal of government-imposed guidelines will lead to a decrease in unemployment, because firms will experience lower labor expenses.

B)   When government-mandated barriers to entry and exit are eliminated, an industry will become more competitive.

C)   The effects of the capture hypothesis will no longer exist, resulting in decreased prices for consumers.

Q2. Which of the following statements is most accurate regarding the theory of contestable markets?

A)   If an industry has low barriers of entry and exit, the number of market participants does not affect pricing competitiveness in an industry.

B)   An industry’s barriers to entry and exit must be high in order to have competitive pricing among the low cost producers of the industry.

C)   The greater the number of industry participants, the more competitive the pricing.

答案和详解如下：

Q1. Which of the following statements most accurately describes a benefit of deregulation?

A)   The removal of government-imposed guidelines will lead to a decrease in unemployment, because firms will experience lower labor expenses.

B)   When government-mandated barriers to entry and exit are eliminated, an industry will become more competitive.

C)   The effects of the capture hypothesis will no longer exist, resulting in decreased prices for consumers.

Correct answer is B)

Removal of barriers will lead to new entrants into the industry, and prices will decrease toward the producers’ average costs, eliminating any excess profits that exist under regulation.

Q2. Which of the following statements is most accurate regarding the theory of contestable markets?

A)   If an industry has low barriers of entry and exit, the number of market participants does not affect pricing competitiveness in an industry.

B)   An industry’s barriers to entry and exit must be high in order to have competitive pricing among the low cost producers of the industry.

C)   The greater the number of industry participants, the more competitive the pricing.

Correct answer is A)

If there are low barriers to entry and exit in an industry and pricing inefficiencies occur, participants will enter the industry, thus increasing pricing competitiveness and restoring pricing equilibrium. Therefore, under the theory of contestable market, pricing will remain competitive, regardless of the number of market participants.

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