The Public Choice Theory of Regulation

question 44

Multiple Choice

The public choice theory of regulation:

• A) holds that firms may have to be regulated in order to guarantee that certain goods and services are available to consumers.
• B) is often justified by pointing to such things as pollution that are not considered by firms on their own.
• C) is used to counter market failure.
• D) holds that a regulatory agency often serves the interests of government bureaucrats over those of the public.

---

Definitions:

Effective Annual Yield

The annual return on an investment, accounting for the effect of compounding interest over a period of time.

Interest Payment

A payment made to a lender by a borrower as compensation for the use of borrowed money, typically expressed as an annual percentage of the loan balance.

Zero-Coupon Bond

A type of bond that does not pay periodic interest payments and is instead issued at a deep discount to its face value.

Implicit Interest

The cost of borrowing that is not explicitly stated as an interest rate, often factored into the terms of leases or other financial agreements.