Regulation & Deregulation
Chapter 7 Section 4
1. Goal
6. Recently Deregulated
Industries
Keep firms from controlling
the price & supply of
important goods
2. Antitrust Powers
(1) watch & regulate
industry (2) stop formation
of cartels or monopolies
(3) break up existing
monopolies
Airlines, trucking, banking,
railroads, natural gas,
television broadcasting
GOVERNMENT
MARKET
INTERVENTION
3. Complaints Against
Microsoft
5. Guidelines for Mergers
Must prove that merger
would lower costs &
consumer prices or lead to
a better product
4. Complaints Against
AT&T
Using legal monopoly in
local service to take control
over markets for longdistance phone calls &
communications equipment
Requiring manufacturers to
include Microsoft browser
with Microsoft operating
system & predatory pricing
Rewrite each sentence correctly
using the key term
• Price fixing is the practice of setting the
market price below cost for the short term
to drive competitors out of business.
• Predatory pricing
• Perfect competition means that the
government no longer decides a
company’s market role and pricing.
• Deregulation
• A monopoly occurs when a company
joins with another company to form a
single firm.
• merger
What is the purpose of antitrust
laws?
• Antitrust laws are designed to encourage
competition in the marketplace.
Under what conditions will the
government approve a merger?
• The government approves mergers only
when the combined company will not be
able to exert unfair control over markets or
prices.
How does predatory pricing hurt
competition?
• Predatory pricing usually leads to one or
more firms being forced out of a market,
limiting consumer choice and competition
and resulting in higher prices.
How did deregulation change the
banking and air travel industries?
• Banking deregulation led to the Savings &
Loan Crisis of the 1980s, as banks had
more freedom to make riskier investments.
• Airline deregulation led to some mergers
and some firms dropping out of the
business but also to lower air fares for
consumers.
Why did the government once
regulate the banking, trucking, &
airline industries?
• These industries were considered natural
monopolies.
• The government regulated these and other
industries to prevent businesses from
using market power to control prices and
output.
Why does the government believe
it has the right to intervene in
markets to promote competition?
• The government intervenes because
competition is an important part of the free
enterprise system and should be
protected.