9. Study Questions and Problems #9 Assume a regulatory agency is given authority over prices and entry conditions for a given industry. Also assume that the agency decides to allow new entry, as the Civil Aeronautics Board (CAB) did before airline deregulation, only when it is proven to be "necessary." This will reduce competition and drive up prices, hurting New entrants Existing regulated firms O Consumers This condition is expected to favor:

Draw the demand curve, marginal revenue, and marginal cost curves from Figure 9.6, and identify the quantity of output the monopoly wishes to supply and the price it will charge. Suppose demand for the monopolys product increases dramatically. Draw the new demand me. What happens to the marginal revenue as a result of the increase in demand? What happens to the marginal cost curve? Identify the new profit-maximizing quantity and price. Does the answer make sense to you? Figure 9.6 Illustrating Profits at the HealthPill Monolpoly

What might some of the negatives of deregulation be?

Why does regulatory capture reduce the persuasiveness of the case for regulating industries for the benefit of consumers?