A common feature of regulated industries is cross-subsidization, which is a situation when one group of customers pays prices above costs while another group of customers pays prices below costs. The one group is subsidizing the other group. Is this
practice more consistent with the capture hypothesis or the share-the-gains, share-the-pains theory? Explain.
What will be an ideal response?
Cross-subsidization is more consistent with the share-the-gains, share-the-pains theory. The capture hypothesis can explain why the firms would be able to charge prices above costs to the one group but not why they have to charge prices below costs to another group. But the share-the-gains, share-the pains theory explains this by saying the subsidized group of customers has been able to influence the regulators so that their costs are not so great to themselves.
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The Bureau of Labor Statistics (BLS) compiles information about employment by
A) performing a census of every household in the nation. B) performing a quarterly survey 6,000,000 households. C) performing a monthly survey of 60,000 households. D) determining the average estimate of labor market specialists around the nation. E) contacting each of the 50 states' Departments of Labor.
In the short-run, a firm's decision to shut-down should not include
a. Avoidable costs b. Variable costs c. Fixed costs d. Marginal costs