Explain the capture hypothesis
What will be an ideal response?
The capture hypothesis is a theory of regulatory behavior that predicts that the regulators eventually will be captured by the special interests of the industry being regulated. It is observed that many times regulators come from the regulated industry. Further, the firms have more at stake than consumers and are more likely to organize and lobby for favors than are the consumers. Hence, over time, the regulators will tend to do what the regulated firms want rather than what the consumers want.
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The above table gives some cost data for Peter's Pickles. Peter's fixed cost is $20. Average variable cost (AVC) is lowest when output is equal to
A) 1 barrel of pickles. B) 2 barrels of pickles. C) 3 barrels of pickles. D) 4 barrels of pickles.
In which case is the political process most likely to result in the acceptance of efficient projects and rejection of inefficient projects?
a. The benefits are highly concentrated, and costs are widespread among voters. b. The costs are highly concentrated, and the benefits are widespread among voters. c. Both the benefits and costs are widespread among voters. d. The benefits accrue primarily in the future, while the costs are more visible during the current period.