Suppose a manufacturing firm that is about to be regulated faces the following actual and potential production costs: 1)$500 before regulation;2)$630 in the future without the regulation;and 3)$700 in the future with the regulation.The true cost of the proposed regulation is $200.
$200 represents the before/after costs of the regulation while the true cost is better reflected by the with/without costs of the regulation which in this example would be $70.

Question

Quizplus · Accepted Answer

The statement is false. The true cost of the regulation is actually $170 ($700 - $630), which reflects the additional cost incurred due to the regulation. The $200 figure only represents the difference in costs before and after regulation, which does not accurately represent the true cost of the regulation.

Suppose a Manufacturing Firm That Is About to Be Regulated