In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
In the figure,
D: Demand curve for automobiles
S 1 : Supply curve of automobiles prior to regulation
S 2 : Supply curve of automobiles after regulation
FG: Clean up cost per unit
-When examining the costs of regulation to the U.S. economy, economists can safely ignore the opportunity costs of regulation because they are relatively insignificant compared with the direct costs of regulation.

Question

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
  In the figure,
D: Demand curve for automobiles
S 1 : Supply curve of automobiles prior to regulation
S 2 : Supply curve of automobiles after regulation
FG: Clean up cost per unit
-When examining the costs of regulation to the U.S. economy, economists can safely ignore the opportunity costs of regulation because they are relatively insignificant compared with the direct costs of regulation.

Quizplus · Accepted Answer

Economists cannot safely ignore the opportunity costs of regulation because they can be significant and have long-term effects on the economy. Opportunity costs refer to the potential benefits that are foregone as a result of regulation, such as reduced innovation, higher prices for consumers, and reduced economic growth. While direct costs are easier to measure, opportunity costs also need to be considered when evaluating the overall impact of regulation on the economy.

In the Following Figure, the First Panel Shows a Market