chapter 12 - Chapter 12 Economic regulation- the regulation...

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Chapter 12 Economic regulation - the regulation and deregulation of prices and quantities in industries such as utilities, airlines and trucking Anti-trust laws - it is possible for the government to break a large firm into smaller pieces to overcome the problems of a monopoly Regulatory lag - if economic conditions change, the prices the firm is allowed to charge may not keep pace Deregulation - the government removes some of the rules that had restricted competition An unanticipated consequence of deregulation was that the airlines developed hub-and- spoke route systems (the airlines sent more traffic through their “hubs”). The firm had a common location that most flights went to. This allowed them to use larger, more efficient aircrafts=> they were able to offer more frequent flights over many routes at the same time that they lowered prices. We can’t always predict what will happen as a result of deregulation. By unleashing the forces of competition, deregulation gives incentives
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This note was uploaded on 12/04/2011 for the course EC 201 taught by Professor Haider during the Fall '10 term at Michigan State University.

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chapter 12 - Chapter 12 Economic regulation- the regulation...

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