Egt1: 309.1.3-06

1487 Words6 Pages
A. Define industrial (i.e., economic) regulation. Industrial Regulation is a type of regulation where the government concerns itself with public services in specific industries, such as public utilities, and how much consumers are charged by companies for the services provided. 1. Explain why industrial regulation exists. Industrial regulation is very important and was created to serve in the public's interest. Industrial regulation exists to moderate public services and governs control over prices for those services. One of the main reasons industrial regulation exists is to prevent a natural monopoly from becoming a regular monopoly and charging extravagant prices for its goods and/or services. 2. Explain how industrial regulation affects the market. Industrial regulation is intended to affect the market in a positive way, benefitting both the consumer and society as a whole. But over the years there has been mixed results. On the positive side, industrial regulation helps to pass on to the consumer the savings that monopolists enjoy as far as cost reductions while also preventing the restrictions on output and higher prices that are typical of an unregulated monopoly. Additionally, in cases where competition is not practical, a monopoly is encouraged so that consumers can benefit from the low per-unit costs, so long as the monopoly’s prices are regulated (McConnell, 2011). Some negative aspects of industrial regulation are the costs and inefficiency associated with it, and that it can also form a perpetuating monopoly, where a monopoly continues to exist much longer than a natural monopoly should. 3. Explain the entities affected by industrial regulation in terms of market structure. a. Explain why industrial regulation affects those entities you indentified. Monopolies and oligopolies are the entities that are primarily affected by industrial
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