Which of the following illustrates the economic inefficiencies of government regulation?
A) Railroad rate increases are set by a government agency and these increases fall below increases in repair and depreciation costs but railroad passengers are satisfied.
B) Competitive railroad rates are determined by the buying and selling actions of those in the railroad industry.
C) Rate increases set by government agencies are set to match the increases in repair costs and the acceleration in depreciated capital.
D) Government protects private and individual rights to goods, service and resources.

Question

Quizplus · Accepted Answer

Government regulation can lead to economic inefficiencies when it sets prices that do not cover the full costs of production, as in the case where railroad rate increases do not match the increases in repair and depreciation costs. This can lead to underinvestment in the sector and a deterioration of services over time.

Which of the Following Illustrates the Economic Inefficiencies of Government