Question

Explain why in theory that, when it comes to the regulation of environmental quality, airline safety, or other health and safety regulation, that social welfare might be improved by less, rather than more regulation

Answer 1

More regulation has following impacts:

1. Putting up taxes and tariff as a part to regulated the industry and promote environment quality.
2. Smaller players who cannot afford the regulation, are driven out of the market.
3. Increased tax are reflected into the increased price due to less competition and concentration of the industry
4. It increases the bigger size of the deadweight loss.

Above impacts lead to the relatively higher reduction of the social welfare. If less regulations take place, then market forces decide the level of quality and competition among the service providers. It increases the relatively superior quality and lower prices in the market. It benefits the consumers and social welfare increases.