the regulatory body often ends up protecting the firms from competition.

Question

Quizplus · Accepted Answer

1) The regulatory body may have the power to limit the number of firms in a particular industry, thereby reducing competition. This is true, as seen in industries such as telecommunications or airlines.

2) The regulatory body may also establish regulatory requirements that are costly for new entrants to comply with, creating barriers to entry and protecting existing firms. This is true for regulated industries such as pharmaceuticals or financial services.

3) However, it is not necessarily accurate to say that the regulatory body always protects firms from competition, as some regulations may be put in place to promote competition and protect consumers. Nevertheless, this statement is generally true, as regulatory capture and industry influence may lead to regulations that protect firms from competition.

The Regulatory Body Often Ends Up Protecting the Firms from Competition