Describe the difference between social interest theory of regulation and the capture theory of regulation
What will be an ideal response?
Both are theories of regulation but they differ according to what they see as to the goal of the regulation. The social interest theory assumes that regulation that seeks an efficient use of resources. It asserts that the political process works to eliminate deadweight loss by using appropriate regulations. The capture theory proposes that producers bend the regulators to their will so that resources are not used efficiently because regulated market outcomes favor producers. Everyone else but producers bears the cost of this regulation. Because this cost is a small amount per person, no one finds it worthwhile to propose legislation to avoid it.
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The rate at which one currency can be traded for another is called the
A) terms of trade. B) exchange rate. C) transfer rate. D) coupon rate.
When the economy responds to a supply shock, there is ________ in the short run and ________ in the long run between inflation and unemployment
A) an inverse relationship; no trade-off B) no trade-off; an inverse relationship C) an inverse relationship; an inverse relationship D) no trade-off; no trade-off
A monopolist union that desired to maximize its total wage bill ( ) would offer that quantity of labor for which
a. labor's marginal productivity is zero. b. labor's wage falls to zero. c. the quantity of labor hired is as great as possible given the firm's demand curve. d. the marginal revenue from providing one more worker to the market is zero.
The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is:
a. perfectly elastic. b. elastic. c. perfectly inelastic. d. unitary elastic.