What Is One Reason Existing Firms Might Lobby the Government

question 54

Multiple Choice

What is one reason existing firms might lobby the government to increase regulation in their industry?

• A) It increases entry and exit costs, thereby reducing producer surplus to existing firms.
• B) It increases entry and exit costs, thereby potentially increasing producer surplus to existing firms.
• C) It increases entry and exit costs, but has no impact on producer surplus.
• D) Firms cannot be trusted to treat their customers fairly and ethically.

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Definitions:

Mercantilism

An economic theory and practice dominant in Europe from the 16th to the 18th century, focusing on building a nation's wealth by exporting more than it imports and accumulating precious metals.

British Parliament

The supreme legislative body in the United Kingdom, consisting of two houses: the House of Commons and the House of Lords.

Economic Relationship

The connections between economic entities or principles, including the ways in which they interact and influence each other.

Salem Village

Historical community located in Massachusetts known for the Salem Witch Trials of 1692, where accusations of witchcraft led to trials and executions.