Explain why competition in these areas has not lowered prices and how price fixing, competition, and government regulation play a role.

Price fixing, competition, and government regulation

1. For years now, utilities, phones companies, and cable/Internet providers have been deregulated, which, in theory, gives customers more choices. However, many consumers still only have one choice when it comes to their natural gas provider or cable/Internet provider. And those who do have a choice tend to be faced with prices from two or more companies that are near identical to each other. And neither is lower than the prices before the deregulation, which is not what consumers were expecting after being told the deregulated market would offer more competitive prices. Explain why competition in these areas has not lowered prices and how price fixing, competition, and government regulation play a role.

2. Most countries in the modern world have some sort of letter mail delivery system. The United States Postal Service is, by far, the most efficient, affordable, reliable system in the world with every box in the country being delivered every day of the 6-day delivery week. Not to mention a first-class letter costs the same whether it is mailed next door or across the country. Yet, many people feel the monopoly of the USPS isn’t fair because there is no competition. If you want a letter mailed for less than $1.00 the USPS is the only choice (other package carriers can deliver letter mail, but the rates are much higher than the USPS.)

If monopolies are bad, why does the government insist on keeping this one alive by blocking competition? What if the USPS decides to cut Saturday delivery (as has been discussed every few years for the past 20 years) or, due to a decline in mail volume, cuts delivery to 3 days per week. Would the government still be able to justify a monopoly then? Or should monopolies all be done away with? Explain your answer.

3. The sign on the beach reads “$25 fine for littering.” A beach user nonetheless tosses his used soda bottles on the sand rather than walk to the distant trash barrel. He knows that the beach patrol has seen him and will issue a citation, but he is very wealthy, and so places a very low marginal value on money and a very high marginal value on time. Would you call him a litterer if he were willing to pay the fine? Or has he purchased the right to use the sand as a waste receptacle? What if he littered on your private property? How does that change the situation?

4. When you bought your house, only 5 commercial planes passed over it daily, on average. That number has grown slowly and almost imperceptibly over the intervening years, and now numbers 150. Is the change from 5 to 150 a drastic or radical change? Is your situation with 150 planes flying over your house each day more tolerable because the number increased slowly and imperceptibly? Would you be more likely to receive compensation of some sort if the changes had occurred over a very short period of time? Does the fact that we can’t tell which straw broke the camel’s back mean that the addition of more straw to the camel’s burden was not the cause of its broken back?

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