Regulation and Antitrust Policy (Econ 180)
Drake University, Spring 2011
William M. Boal

Course page: www.drake.edu/cbpa/econ/boal/180
Blackboard: bb.drake.edu
Email: william.boal@drake.edu

QUIZ 14 ANSWER KEY
Regulation and Deregulation of Transportation

Version A

I. Multiple choice [3 pts each: 15 pts total]

(1)c. (2)b. (3)a. (4)a. (5)c.

II. Problems

(1) [Effects of regulation on cost: 14 pts]

  1. $3.
  2. 10 thousand.
  3. 6 thousand.
  4. $8 thousand.
  5. $24 thousand.
  6. $18 thousand.
  7. $14 thousand.

(2) [Effect of regulation on quality: 14 pts]

  1. 4 million.
  2. 6 million.
  3. 0 million.
  4. $8 million.
  5. 3 million.
  6. $8 million.
  7. $16 million.

(3) [Maximum prices and exit restrictions: 15 pts]

  1. $2 million.
  2. $18 million.
  3. $4.
  4. $4.5 million.
  5. $6.5 million.

(4) [Measuring effects of regulation: 9 pts]

  1. $6000.
  2. $14000.
  3. $9000.

(5) [Railroad deregulation: 6 pts]

  1. False.
  2. True.
  3. False.

(6) [Trucking deregulation: 6 pts]

  1. True.
  2. False.
  3. True.

(7) [Airline deregulation: 6 pts]

  1. False.
  2. False.
  3. False.
  4. True.
  5. True.
  6. False.
  7. True.
  8. False.

III. Challenge question [5 pts]

If fast-food restaurants were required to charge a minimum price of at least $10 for a meal, then restaurants could no longer compete on price. So they would compete on quality, and fast-food quality would improve. However, consumers would be worse off, because the minimum price is equivalent to banning a product: low-quality fast-food. This is an example of excessive nonprice competition. (See problem (2) in this quiz.)

Version B

I. Multiple choice [3 pts each: 15 pts total]

(1)d. (2)c. (3)a. (4)b. (5)a.

II. Problems

(1) [Effects of regulation on cost: 14 pts]

  1. $3.
  2. 10 thousand.
  3. 8 thousand.
  4. $2 thousand.
  5. $16 thousand.
  6. $8 thousand.
  7. $10 thousand.

(2) [Effect of regulation on quality: 14 pts]

  1. 6 million.
  2. 5 million.
  3. 0 million.
  4. $18 million.
  5. 3 million.
  6. $8 million.
  7. $26 million.

(3) [Maximum prices and exit restrictions: 15 pts]

  1. $0.5 million.
  2. $8 million.
  3. $6.
  4. $2 million.
  5. $2.5 million.

(4) [Measuring effects of regulation: 9 pts]

  1. $8000.
  2. $6000.
  3. $10000.

(5) [Railroad deregulation: 6 pts]

  1. False.
  2. False.
  3. True.

(6) [Trucking deregulation: 6 pts]

  1. True.
  2. True.
  3. False.

(7) [Airline deregulation: 6 pts]

  1. True.
  2. False.
  3. False.
  4. False.
  5. False.
  6. True.
  7. True.
  8. False.

III. Challenge question [5 pts]

Same as Version A.

[end of answer key]