Although companies generally do not wish to be regulated by the government, some monopolists welcome regulation of the industry. Which statement BEST explains why?
A) Regulation is rent-seeking activity because once an industry is declared a monopoly, the firm is protected from competition.
B) Regulation is an x-inefficiency because a monopolist feels the need to waste resources on dealing with government regulators.
C) Regulation maximizes profits because the government looks favorably on price discrimination.
D) Regulation helps the firm become more efficient because the government prefers to subsidize monopolies.

Question

Quizplus · Accepted Answer

Regulation can act as a barrier to entry for potential competitors, effectively protecting the monopolist's market position and allowing it to maintain control over pricing and production without the threat of new entrants. This is why some monopolists may welcome regulation.

Although Companies Generally Do Not Wish to Be Regulated by the Government