Suppose That a Regulated Industry Experiences an Increase in the Price

question 227

Multiple Choice

Suppose that a regulated industry experiences an increase in the price of inputs used to produce the good. According to the capture theory, we would expect

• A) prices to increase by a little immediately and profits to decrease by a lot.
• B) there will be some increase in price but not immediately.
• C) no increase in price.
• D) a quick increase in price maintains profits in the industry.

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Definitions:

Going Public

The process by which a private company offers shares to the public in a new stock issuance, becoming a publicly-traded company.

New Issue Market

The market segment dedicated to the initial offering of securities to the public, including stocks and bonds from a corporation making its market debut.

Underwriting Compensation

Fees or commissions paid to underwriters for their services in issuing and selling new securities.

Common Stock

A type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s profits or losses.