The social interest theory of regulation asserts that regulation
A) seeks an efficient use of resources.
B) is aimed at keeping prices as low as possible.
C) helps firms maximize economic profit.
D) of a natural monopoly must be done using rate of return regulation.
E) does not work for society as well as would allowing the firms freedom from regulation.

Question

Quizplus · Accepted Answer

The social interest theory of regulation asserts that regulation seeks an efficient use of resources in order to promote the overall welfare of society. It is not aimed at keeping prices as low as possible or helping firms maximize economic profit, as these goals may conflict with the interests of consumers and society as a whole. Rate of return regulation is one specific type of regulation that may be used for natural monopolies, but it is not the only option. The assertion that regulation does not work for society as well as allowing firms freedom from regulation is a matter of debate and not a feature of the social interest theory of regulation itself.

The Social Interest Theory of Regulation Asserts That Regulation