Asked by Vaishnavi Surnis on Jul 21, 2024
Verified
The legal cartel theory of regulation argues that
A) regulation encourages firms to inflate their production costs.
B) firms in certain industries want to be regulated rather than face the rigors of competition.
C) social regulation has been carried beyond the point at which marginal benefits and marginal costs are equal.
D) the government is the logical agency to protect consumers from natural monopolies.
Industrial Regulation
The imposition of rules by the government on firms and industries to promote competition, control monopoly power, protect consumers, and regulate prices and service quality.
Production Costs
Expenses incurred in the process of manufacturing or producing goods, including materials, labor, and overhead costs.
- Comprehend the fundamentals and critiques of industrial regulation, including the justification behind the regulation of natural monopolies.
- Understand the basis and disapproval of regulating industries.
Verified Answer
JE
Jahongir ErgashevJul 24, 2024
Final Answer :
B
Explanation :
The legal cartel theory of regulation suggests that firms in some industries prefer regulation as it can reduce competition and allow them to maintain higher prices and profits, essentially acting like a cartel but with government enforcement.
Learning Objectives
- Comprehend the fundamentals and critiques of industrial regulation, including the justification behind the regulation of natural monopolies.
- Understand the basis and disapproval of regulating industries.
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