The Capture Theory of Regulation Predicts That

question 268

Multiple Choice

The capture theory of regulation predicts that

• A) regulation helps producers to maximize profits.
• B) regulators capture the firm's economic profit and transfer it to consumers as consumer surplus.
• C) regulators eliminate the deadweight loss a monopoly can create.
• D) resources are used efficiently.
• E) regulators capture the firm's economic profit and transfer it to themselves.

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Definitions:

Abnormal Return

Abnormal Return is the difference in the actual return of a security over a set period of time from its expected return based on the market or model prediction.

Bonds

Fixed income investment products that represent a loan made by an investor to a borrower, typically corporate or governmental, which pays periodic interest payments and the return of the principal at maturity.

Jensen's Measure

A performance evaluation metric that measures the excess return of an investment portfolio over the predicted return, adjusted for market risk.

Residual Standard Deviation

A measure of the amount of variability in a set of residuals not explained by the predictive variables in a regression model.