Government Price Regulation affiliation Government Price Regulation Industrial regulation refers to the regulation of an industry by the government. The government administers a regulation that allocates responsibilities to a given industry. The regulations occur due to market failure, inadequate information, monopoly, or interests of different groups. The regulations check the prices of an industry to avoid exploiting consumers and starting a monopoly. The manufacturers must ensure safety for consumers, and the business men must comply with the government laws regarding certain products. These regulations have several effects on the market. Investors require a plan on how to meet the requirements and still make a profit.
The government introduces price regulations that the business must adhere to. Therefore, the businessmen cannot introduce their own prices. These laws also define the entry regulations for businesses in a certain industry. Some of the entities affected by these regulations include prices, and monopolies. The government regulates the prices of the products. The business cannot raise its prices to increase its profits. Lowest prices must also be in accordance to the regulations. The businesses may also adopt low prices such that new business entrants operate at a loss.
This helps them to maintain their cost advantage. Monopoly cannot be created in the market. Businesses already operating in the industry cannot create a monopoly and deny the customers any other source of the products. This also helps control the market prices due to competition. They define a fair rate of prices for fair profit returns to the business. Social regulations refer to rules governing business activities that affect the society. For example, a company might damp solid wastes in rivers or forests.
The government must impose rules that guard against such practices. Interest rates for banks must be regulated and pharmaceuticals must give side effects of drugs. Entities affected by these regulations are costs and information. The company must give the producers information regarding their products. This information includes safety measures, side effects, utility guide, and constituents of the products. The company must provide benefits information that is cost effective (Kleiner and Kudrle, 2000). Natural monopoly occurs where the costs of business establishment are very high.
Few companies operate in the industry reducing competition. The government sets up high costs for operating businesses in certain industries. For example in the power industry, setting up and operating a power generation and transmission plant is very expensive (Gans, 2011). Antitrust laws regulate corporations. Contracts between competitors dealing with the same product are limited by the government. The minimum levels of product quality are regulated and consumers should be provided with product details. The laws regulate business monopoly. A business cannot form any type of monopoly. Mergers and acquisitions that create monopoly or reduce competition or product quality are restricted. The main industrial regulation commissions are; Federal Energy Regulatory commission, state public utility commission, and federal communications commission.
FERC regulates gas, electricity, and oil transmission and national rates. SPUC regulates gas, telephones, electricity etc in every state. Each state has its own SPUC. FCC regulates national transmission of television, radio, cable telephone etc (Kleiner and Kudrle, 2000). OSHA protects workers by determining and inspecting the safety and health conditions in the industries. EEOC defines employment conditions. It oversees hiring, firing, and promotions. EPA protects the environment. it guards against air, water, and noise pollution.
CPSC regulates product design of potentially unsafe products such as guns, children toys, pool grills etc. FDA provides guidelines for food and drugs. It regulates and supervises drug production, food safety, supplements, tobacco products etc. References Gans, J. (2011). Principles of economics. South Melbourne, Vic: Cengage Learning. Kleiner, M., and Kudrle, R. (2000). Does regulation affect economic outcomes? The case of dentistry. Journal of law and economics, 547-582