The Lac I gene is not a part of the Lac operon but is essential for its expression. The Lac Operon activity is regulated by the repressor protein which binds to the operator site thus, not allowing the transcripton process to occur and hence, no lactose gets produced when it is available in the enviornment. Thus there is no excessive production of the lactose. However, when there is a mutation in the Lac I gene, the production of the repressor protin which is encoded by the same gene doesn't happen. This in turn, interferes with the regulation of the lactose operon.
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