Suppose that a regulatory agency helps producers maximize economic profit.This type of regulation coincides with
A) a natural monopoly.
B) a marginal cost pricing rule.
C) an average cost pricing rule.
D) the capture theory of regulation.
E) the social interest theory of regulation.

Question

Quizplus · Accepted Answer

The capture theory of regulation suggests that regulatory agencies are often captured by the industries they are supposed to regulate, resulting in regulations that benefit producers at the expense of consumers. Therefore, if a regulatory agency is helping producers maximize economic profit, it is likely that the agency has been captured by the industry and is not acting in the social interest.

Suppose That a Regulatory Agency Helps Producers Maximize Economic Profit