The Public Choice Theory of Regulation

question 44

Multiple Choice

The public choice theory of regulation:

• A) holds that firms may have to be regulated in order to guarantee that certain goods and services are available to consumers.
• B) is often justified by pointing to such things as pollution that are not considered by firms on their own.
• C) is used to counter market failure.
• D) holds that a regulatory agency often serves the interests of government bureaucrats over those of the public.

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Definitions:

Public Policy

Principles and standards considered by the government to be beneficial for the community and used as a guideline for legislative or regulatory actions.

Incidental Damages

Compensation for reasonably associated losses that occur as a direct result of a breach of contract or injury.

Resale Price

The price at which an item is sold again to the public, after being purchased from the original seller.

Contract Price

The total amount of money agreed upon for the sale of goods or services in a contractual agreement.