Question & Answer

Have unemployment rates generally risen or fallen over the decades or is there no discernible pattern? Does the answer vary by country? 

How have growth rates varied over the decades? Does the answer vary by country?

Why might it equally result in average cost pricing?

If the regulator imposed such rules, would they cause the firm to make a loss if it faced a downward-sloping LRMSC curve? (Clues: Where would the LRAC curve be relative to the LRMC curve? What would be the effect of externalities and the addition of the Z factor on the price?)

1. In the case of buses, subsidies are often paid by local authorities to support various loss‑making routes. Is this the best way of supporting these services?

2. In the case of postal services, profitable parts of the service cross-subsidise the unprofitable parts. Should this continue if the industry were privatised?

To what extent can the problems with privatisation be seen as arguments in favour of nationalisation?

If two or more firms were charging similar prices, what types of evidence would you look for to prove that this was collusion rather than coincidence?

If anti-monopoly legislation is effective enough, is there ever any need to prevent mergers from going ahead?

To what extent is Article 102 consistent with both these points of view?

Are all such agreements necessarily against the interests of consumers?

What are the possible disadvantages of vertical mergers?

Try to formulate a definition of ‘the public interest’.

Which is preferable: general subsidies for public transport, or cheap fare policies for specific groups (such as children, students and pensioners)?

Would a tax on car tyres be a good way of restricting car usage?

What other types of transport could be directly provided by the government or a local authority?

Complete Table 13.3 up to 9 cars per minute, assuming that the journey time increases to 24 minutes for the eighth car and 35 minutes for the ninth car.

Go through each of the determinants we have identified so far and show how the respective elasticity of demand makes the problem of traffic congestion a difficult one to tackle.

Is the cross-price elasticity of demand for road space with respect to the price of cars likely to be high or low?

Are there any costs associated with motoring that would not be included as marginal costs? Explain.

How does an international negotiation ‘game’ differ from the prisoners’ dilemma game?

Draw a diagram like Figure 13.2, only this time assume that the activity has the effect of reducing pollution, with the result that there are marginal external benefits. Identify the socially optimal level of the activity. What would be the level of subsidy required to achieve this level of activity?

Look through the categories of possible market failings in section 12.2. Are there any others, in addition to the four we have just identified, that will result in a socially inefficient use of the environment?

Using examples, discuss the conflicts between using the environment as productive resource and as a dump?

Are there any features of free-market capitalism which would discourage innovation?

Go through the above arguments and give a reply to the criticisms made of government intervention.