Suppose that a regulated industry experiences an increase in the price of inputs used to produce the good. According to the capture theory, we would expect

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Capture theory suggests that regulatory agencies may be "captured" by the industries they are supposed to regulate, leading to decisions that benefit the industry. Therefore, if the price of inputs increases, the theory would predict a quick adjustment in prices to maintain industry profits, as the regulatory body may allow or facilitate such increases to benefit the industry it is aligned with.

Suppose That a Regulated Industry Experiences an Increase in the Price