Which of the following factors helps to determine how the costs of social regulation are split between consumers and producers.
A)The price elasticities of demand and supply
B)The quantity produced by the firm
C)The average total costs of the firm before regulation
D)The number of consumers in the market
E)The number of producers in the market

Question

Quizplus · Accepted Answer

The price elasticities of demand and supply determine how much the consumer and producer respectively will bear the burden of the cost of social regulation. If the demand is highly elastic, the producer may have to bear most of the cost, as consumers will be less willing to pay higher prices. If the supply is highly elastic, the burden may shift to the consumer, as producers will be able to shift the cost by reducing production.

Which of the Following Factors Helps to Determine How the Costs