Suppose the transportation industry has been regulated for many years. Government now proposes to deregulate the industry, only to find that firms in the industry oppose this action. This is consistent with the
A) public interest theory of regulation.
B) theory of natural monopolies.
C) legal cartel theory of regulation.
D) Alcoa and U.S. Steel court decisions.

Question

Quizplus · Accepted Answer

The legal cartel theory of regulation states that industries can create a regulated environment that acts like a cartel, allowing firms to restrict competition and increase profits. In this scenario, the firms in the transportation industry may oppose deregulation because they benefit from the current regulatory environment, which limits competition and allows them to set higher prices.

Suppose the Transportation Industry Has Been Regulated for Many Years