Define the following terms and explain their importance to the study of economics:
a. antitrust policy
b. economies of scale
c. economies of scope
a. Antitrust policy is designed to prevent the acquisition of monopoly power and to ban certain monopolistic practices.
b. Economies of scale are cost savings that are acquired through increases in quantities produced. If a firm has large economies of scale, it may be a natural monopoly. Natural monopoly is one justification for regulation.
c. Economies of scope are cost savings that are acquired through simultaneous production of many different products. If a firm has economies of scope, it may be a natural monopoly in the provision of those products, and a candidate for regulation.
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Elasticity is a useful tool in learning more about the character of demand. It depicts
a. the way to find market equilibrium b. a ratio of percentage changes c. how easily prices adjust to changing market (supply and demand) conditions d. how price changes as quantity demanded changes e. how consumers react to shifts in demand
Under the adaptive expectations hypothesis, which of the following is the most likely long-run effect of a move to a more expansionary monetary policy?
a. higher prices and no change in real output b. higher prices and expansion in real output c. no change in prices but an expansion in real output d. no change in either prices or real output