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Exam 18: Competition Policy

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Question 21

Multiple Choice

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When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly:

A) has no incentive to exit the industry
B) will experience a price below average total cost
C) may rely on a government subsidy to remain in business
D) both B and C are true

E) None of the above
F) A) and B)

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Question 22

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Competition laws may increase the cost of operating by restricting synergistic mergers.

A) True
B) False

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Question 23

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In the Microsoft antitrust lawsuit, Microsoft's lawyers argued that selling an internet browser and operating system together is no different to:

Why might economists prefer private ownership of monopolies over public ownership of monopolies?

The ACCC has denied, on several occasions, the merger between Air New Zealand and Qantas, yet has approved a merger between Qantas and Emirates.What differences are there between the market for flights from Australia to New Zealand and the market for flights between Australia and Europe (the primary routes on which Qantas and Emirates competed)?

The main rationale for making tying illegal is that:

Re-sale price maintenance is a profit-maximising strategy used by wholesalers to restrict competition amongst retailers.

Corporatisation is the process of providing incentives to make them behave more like private owners.

Government policies that aim to improve the efficiency of oligopolistic and monopoly markets are called:

Explain the practice of tying and discuss why it is controversial.

When regulating a natural monopoly, the government should make the firm charge its marginal cost of production.

Which of the following is necessarily a problem with competition laws?

An important benefit of private ownership of a monopoly is that a private monopoly has more incentive to:

The practice of requiring someone to buy two or more items together, rather than separately, is called:

Intervention by government into oligopoly markets can improve outcomes.

Resale price maintenance prevents retailers from competing on price.

Privatisation of a government-owned asset could reduce future earnings to the country.

Economists generally agree that transparent pricing increases incentives for cartel members to cheat.

In many countries, the government chooses to 'internalise' the monopoly by owning monopoly providers of goods and services.(In some cases these firms are 'nationalised' and the government actually buys or confiscates firms that operate in monopoly markets.) What would be the advantages and disadvantages of such an approach to ensuring that the 'best interest of society' is promoted in these markets? Carefully explain your answer.

If a manufacturer does not exercise retail price maintenance, a free-rider problem may become evident among retailers and ultimately lead to: