BBA 2501 Unit VII Homework

BBA 2501 Unit VII Homework
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Principles of Microeconomics

Answer the following from the Problems Appendix in the back of your textbook on pp. 363-364, and upload your answers through Blackboard:

 Chapter 15: Questions 1-8

Your completed Homework assignment should be at least three to four pages in length. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations. All references and citations used must be in APA style.

Information about accessing the Blackboard Grading Rubric for this assignment is provided below.

Chapter 15 – Economic Regulation and Antitrust Policy

  1. Describe the three types of government regulation of business. Which two are discussed at length in this chapter?
  2. Define market power, and then discuss the rationale for government regulation of firms with market power
  3. The following graph represents a natural monopoly.

    1. Why is this firm considered a natural monopoly?
    2. If the firm is unregulated, what price and output would maximize its profit?  What would be its profit or loss?
    3. If a regulatory commission establishes a price with the goal of achieving allocative efficiency, what would be the price and output? What would be the firm’s profit or loss?
    4. If a regulatory commission establishes a price with a goal of allowing the firm a normal profit, what would be the price and output?  What would be the firm’s profit or loss?
    5. Which one of the prices in parts (b), (c), and (d) maximizes consumer surplus?  What problem, if any, occurs at this price?

  4. Why do producers have more interest in government regulations than consumers do?

    1. Compare and contrast the public-interest and special-interest theories of economic regulation.  What is the capture theory of regulation?
    2. Which theory of regulation explains why the massive fraud of Bernie Madoff went undetected for years?

  5. Identify the type of anticompetitive behavior illustrated by each of the following:

    1. A University requires buyers of season tickets for its basketball games to buy season tickets for its football games as well.
    2. Dairies that bid on contracts to supply milk to school districts collude to increase what they charge.
    3. The same individual serves on the boards of directors of General Motors and Ford.
    4. A large retailer sells merchandise below cost in certain regions to drive competitors out of business.
    5. A producer of soft drinks sells to a retailer only if the retailer agrees not to buy from the producer’s major competitor

  6. Identify the four U.S. merger waves and explain the driving force behind each
  7. Calculate the Herfindahl-Hirschman Index (HHI) for each of the following industries. Which industry is the most concentrated?

    1. An industry with five firms that have the following market shares: 50 percent, 30 percent, 10 percent, 5 percent, and 5 percent
    2. An industry with five firms that have the following market shares: 60 percent, 20 percent, 10 percent, 5 percent, and 5 percent.
    3. An industry with five firms, each of which has a 20 percent market share.

  8. William Shepherd’s research of U.S. industries showed a clear trend in the competitiveness of the U.S. economy between 1958 and 2000.  Is the economy growing more or less competitive, and how did Shepherd explain this trend?

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