chapter17 - Chapter 17 CURBING MARKET POWER Market Failures...

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Chapter 17 CURBING MARKET POWER
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Market Failures Competitive forces in a market may be weak or absent. People may not have enough information to make informed choices without government effort (example: pharmaceuticals). Negative externalities may exist.
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Policy Issue How can government correct market failures without obstructing the efficiency of unfettered market competition and rivalry?
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Business Regulation First Major Federal Step 1887: Founding of the Interstate Commerce Commission (ICC).
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Two Major Tools Command-and-Control Orders Market Incentives Regulation consists of government rules or market incentives designed to control the price, sale, or production decisions of a firm.
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Economic Regulation Economic Regulation involves the control of prices, entry and exit conditions, and standards of service in an industry. Examples: Utilities, transportation, radio, tv, financial industry.
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Social Regulation Social regulation is used to protect the environment along with the health and safety of workers and consumers. Examples are anti-pollution measures or requirements for safety features in cars.
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Three major justifications: 1) Prevent abuses of market power by monopolies and oligopolies. 2)
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This note was uploaded on 11/15/2011 for the course AGEC 7100 taught by Professor Duffy,p during the Fall '08 term at Auburn University.

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chapter17 - Chapter 17 CURBING MARKET POWER Market Failures...

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