1. Individual Problems 23-1

State utility commissions typically regulate local phone companies and the rates they can charge, but local phone companies also offer long-distance service to their customers. Rival long-distance carriers also connect to local phone lines to provide long-distance service to customers.

Assume the state utility commission restricts the price of local phone calls to be below what would prevail in a free market.

True or False: There is likely unrealized profit in the market for local phone calls.

Recently, the rival long-distance carriers have complained that the local phone company repair persons have put peanut butter on rival long-distance carriers' phone lines to encourage rats to eat through the lines.

This practice is known as____ (Tying OR Exclusion).