1215

Which of the following is least likely to be considered a reason why regulation of monopolies is not effective?

A) Regulation reduces the incentive for firms to reduce costs.

B) Regulators do not know the firm’s cost structure.

C) Regulation shifts industry demand and increases prices.

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Regulation is not associated with a shift in industry demand.

1215

Regulations are frequently implemented that attempt to deal with markets with high barriers to entry. Which statement is least likely to be a reason why they often fail?

A) Due to regulation, a firm has little incentive to control costs as the costs can be shifted to consumers via a price increase.

B) Regulators prevent monopolists from making a profit.

C) An existing firm in the industry is able to influence the regulatory board.

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Regulators do not seek to prevent monopolists from making a profit. Instead using average cost pricing, regulators will try to prevent monopolists from making a zero economic profit and ensure the monopolist a normal profit. Both remaining choices are reasons why regulations can fail.

luqian55

thanks a lot