AP Economics Module 77

What are the three main antitrust laws?

1. The Sherman Antitrust Act of 1890 2. The Clayton Antitrust Act of 1914 3. The Federal Trade Commission Act of 1914

How are anti-trust laws used to promote competition?

Antitrust laws are designed to promote competition by preventing business behaviors that concentrate market power.

________ cost pricing occurs when regulators set a monopoly's price equal to its average cost to prevent the firm from incurring a loss.

Average

________ cost pricing occurs when regulators set a monopoly's price equal to its marginal cost to achieve efficiency.

Marginal

A natural monopoly exists when, over the relevant range, increasing the output level results in

average total cost

Which of the following is the most commonly policy approach to a natural monopoly?

price regulation

True or false: Most local utilities are natural monopolies with regulated prices.

true