Question

One contention of the public interest theory of industrial regulation is that:

a) Firms in some industries want to be regulated

b) Regulated monopolies are tantamount to legal cartels

c) The objective of regulation is to protest the public from the market power inherent in natural monopolies

d) While industrial regulation is sound in theory, bureaucrats allow monopolists to obtain excessive profits

Answer 1

Public interest theory of regulation substantiates that regulation is pursued for achieving collective goals. It posits that regulation is required to address market failures and remove barriers inhibiting the marginal cost pricing to prevail in the market. It assumes that regulators have adequate information and enforcement mechanisms to enhance public interests.

One contention of the public interest theory of industrial regulation is that:

c) The objective of regulation is to protest the public from the market power inherent in natural monopolies