Which of the Following Would Best Explain Why Regulatory Capture

question 254

Multiple Choice

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.

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Definitions:

Fixed Costs

Expenses that do not change regardless of the level of production or business activity, such as rent, salaries, and insurance.

Selling Price

The amount of money for which an item is sold, potentially different from listing or cost price due to discounts or negotiations.

Profit

The financial gain achieved when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Net Income

The amount of earnings left over after all expenses and taxes have been deducted from total revenue.