One Problem Associated with Public Regulation of Industries Has Been

question 16

Multiple Choice

One problem associated with public regulation of industries has been the tendency for

• A) regulators to set prices below average variable costs.
• B) most regulatory agencies to be incapable of carrying out their duties.
• C) regulatory commissions to accommodate the requests of the businesses they are supposed to regulate at the expense of the public.
• D) regulatory agencies and legislation to be ruled unconstitutional by the courts.
• E) public regulation to be introduced in markets characterized as natural monopolies, where such regulation is least appropriate.

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Definitions:

Tax Rate

The percentage of income or value of goods that is collected by the government as tax.

Elastic Demand

Product or resource demand whose price elasticity of demand is greater than 1, so that any given percentage change in price leads to a larger percentage change in quantity demanded. As a result, quantity demanded is relatively sensitive to (elastic with respect to) price.

Price Elasticity

A measure of how sensitively the quantity demanded of a good or service responds to a change in its price.

Supply

The total amount of a product or service available for purchase at any given time.