Describe the difference between social interest theory of regulation and the capture theory of regulation
What will be an ideal response?
Both are theories of regulation but they differ according to what they see as to the goal of the regulation. The social interest theory assumes that regulation that seeks an efficient use of resources. It asserts that the political process works to eliminate deadweight loss by using appropriate regulations. The capture theory proposes that producers bend the regulators to their will so that resources are not used efficiently because regulated market outcomes favor producers. Everyone else but producers bears the cost of this regulation. Because this cost is a small amount per person, no one finds it worthwhile to propose legislation to avoid it.
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Crisps and Smith's are the only two bakeries that sell cookies in a small community. Crisps sells butter cookies while Smith's sells chocolate cookies
Which of the following will happen if Smith's lowers its price for cookies slightly below Crisps's price? A) Crisps will lose all its customers to Smith's. B) Smith's will lose all its customers to Crisps. C) Crisps will face a lower demand for its cookies. D) Smith's will face a lower demand for its cookies.
At one point along a PPF 40 tons of wheat are produced while 80 tons of rice are produced. At another point along the same PPF, 41 tons of wheat are produced while 70 tons of rice are produced
The opportunity cost of producing a ton of wheat between these points is ________ per ton of wheat. A) 1/2 ton of rice B) 10 tons of rice C) 1/10 ton of rice D) 4/7 ton of rice