Which of the following would best explain why regulatory capture is a problem?
A. The regulations implemented tend to reduce the profitability of the regulated industry and
reduce global competitiveness.
B. Regulatory capture unduly increases the size and power of government, increasing costs
for taxpayers.
C. Individuals implementing the regulations lack expertise about the industry and therefore
make poor regulatory choices.
D. The regulations implemented serve the private interests of the regulated industry, rather
than addressing social interests such as consumer safety and environmental protection.
Answer: D
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When efficiency is attained, the consumer surplus
A) must be larger than the producer surplus. B) must be smaller than the producer surplus. C) must equal the producer surplus. D) can be either smaller than or larger than but cannot equal the producer surplus. E) can be smaller than, equal to, or larger than the producer surplus.
Answer the following statement true (T) or false (F)
1) If price and total revenue are directly related, demand is inelastic. 2) If price changes and total revenue changes in the opposite direction, demand is relatively elastic. 3) Cross elasticity of demand measures the effect of a change in the price of one product on the quantity demanded of another product. 4) Income elasticity measures the effect of a change in income on the purchases of some good or service. 5) If the coefficient of income elasticity of demand is positive, the product is an inferior good.