Mr Marinello Chippewa Valley Fall 2012 What is Regulation The forces of the market generally keep businesses competitive and attentive to consumer welfare Sometimes government needs to ID: 535622
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Slide1
Regulation & Deregulation
Mr. Marinello * Chippewa Valley * Fall 2012Slide2
What is Regulation?
The
forces of the market generally keep businesses competitive and attentive to consumer welfare.
Sometimes
government
needs to
level the playing field by implementing regulation.
Rules
or laws that control business behavior.
Antitrust
legislation
Laws
that define a monopoly and give
government
the power to control and break them up.Slide3
What does Regulation do for Us?
Ensuring a Level Playing Field
Prohibiting Unfair Business Practices
Businesses use a variety of methods to counteract market forces.
Price Fixing: businesses work together to set prices for competing markets.
1990s 5 major record companies enforced a minimum advertised price to create more profit.
Market Allocation: when competing businesses divide a market amongst themselves.
Businesses agree to stay out of each other’s territory so they can have a monopoly over the area.
Predatory pricing: when businesses set prices really low in order to drive out the competition.Slide4
Protecting
Consumers
When
the
government
realizes that businesses are being unfair they can do a few things.
Cease and desist order:
government
orders a firm to stop an unfair business practice
Public discourse: a policy that requires businesses to reveal product information.
The Federal Trade Commission: responsible for promoting competition and prevention of unfair business practices.Slide5
Deregulation
Sometimes regulation can become onerous.
Reduces
or removes
government
control of business
Many firms began to complain that
government
regulation was hindering profits.
Airlines
. Once airlines were deregulated the prices dropped and many people were able to fly more and cheaper.
But the quality of flights
diminished in
order to keep up with low prices.