Define the following terms and explain their importance to the study of economics:
a.
Antitrust policy
b.
Economies of scale
c.
Economies of scope
What will be an ideal response?
| a. | Antitrust policyis designed to prevent the acquisition of monopoly power and to ban certain monopolistic practices. |
| b. | Economies of scaleare 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 scopeare 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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