Chapter 28 Terms 102 - Forms of Industry Regulation There...

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Forms of Industry Regulation: There are two basic types of government regulation: 1) economic regulation, 2) social regulation. A. Economic Regulation: Initially this was regulation to control prices that natural monopolies were allowed to charge. Over time federal and state governments have sought to regulate the characteristics of products or processes in industries without monopolistic characteristics. B. Social Regulation: The aim of social regulation is to improve the quality of life through improved products, a less polluted environment, and better working conditions. Social regulation affects all firms in the economy and not just certain industries. The Theory of Natural Monopoly Regulation: Whenever a single firm has the ability to produce all of the industry’s output at a lower per-unit cost than any other firm, a natural monopoly arises. The long-run average costs are falling over such a large range of production rates (relative to demand) that only one firm can survive in such an industry.
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