Regulations Flashcards
Robinson-Patman Act 1936
Bans discriminatory price cuts that butt out smaller competition
Federal Trade Commission Act 1914
investigates unfair competitive prices
Clayton Act 1914
promotes competitive pricing of products, bans unlegitamite price discrimination
Sherman Antitrust Act 1890
1st major law created to control monopoly power
-Holds any person who tries to monopolize trade or commerce criminally liable.
Antitrust Policy
Gov. Policy that attempts to prevent collusion among sellers and prevents restraint.
Feedback Effect
Changing behavior after realizing there is a bigger problem; challenging behavior after the regulation that offsets the regulation.
Share-the-gains, share-the-pains Theory
Regulators balance the interests of firms, consumers, and legislators.
Capture Hypothesis
The control of regulatory agencies BY FIRMS. (Paying them off)
Creative Response
Finding loopholes in the law.
Costly gov. regulations
what businesses try to avoid, and get around.
The Lemons Problem
A lack of shared information in an industry (Used car seller and buyer relationship)
Rationales (reasoning) for gov. oversight in nonmonopolistic industries
- market failure arising from externalities
- need for consumer protection that comes from skewed information.
Governmental Regulatory Functions Main Reason
to protect the consumer’s interests
Methods of Rate Regulation
Cost-of-Service Regulation: regulate company/industry so pricing is based on AVERAGE COST OF PRODUCTION (no inflation)
Rate-of-Return Regulation: keeps earning from investing not excessive
Average Cost
Includes cost of all products
Marginal Cost
Cost of adding “one more”
Regulating Natural Monopolies
Understanding of: unregulated natural monopoly, impracticality of marginal cost pricing (in other words, not including cost of making all units), and average cost pricing
Social Regulation
Aim to provide a better quality of life, for everyone
(Less pollution, better products, better working conditions)
Economic regulation of nonmonopolistic industries
Securities, banking, credit unions, transportation, communications
Economic Regulation of Natural Monopolies
Federal and State governments have tried to influence the products and processes of firms in a variety of industries without inherently monopolistic features.
Two Basic Types of Industry Regulations
Economic Regulation: specific industry, monopolistic behavior
Social Regulation: encompasses everyone; for wellbeing
Forms of Regulation
SEC: Security
Banking: Fed, FDIC (insures deposits), comptroller of the currency
Credit Unions: National Credit Union Administration
Transportation: FAA, Federal Motor Carrier Safety Administration
Communications: FCC
Federal Agencies Include FTC, FDA, EEOC, EPA, OSHA, CPSC, Mining safety and health admin.
