Reading 15: Regulation and Antitrust Policy in a Globalized E possible, potential, particular, benefits, 2011

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Session 4: Economics for Valuation
Reading 15: Regulation and Antitrust Policy in a Globalized Economy

LOS b: Discuss the potential benefits and possible negative side effects of social regulation.

 

 

A firm that disagrees with a particular regulation and attempts to avoid it by complying with the specifics of the law but not the intent of the law is demonstrating:

A) creative response.

B) social regulation.

C) the capture hypothesis.

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Creative response describes the actions of a firm that for whatever reason, economic or philosophical, is trying to avoid full compliance with a regulation without any obvious violations of the law. Though technically in compliance, the firm is violating the spirit of the regulation.

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Consumers sometimes alter their behavior in response to the implementation of a new regulation. This unintended consequence of regulation is:

A) a cost of regulation.

B) a creative response.

C) a feedback effect.

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Consumers often react to regulations in ways that were unintended and unforeseen by regulators. These reactions may be positive or negative, but need to be considered when evaluating the full impact of a regulation.

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Three years ago, regulators enacted a new law that was designed to reduce cigarette smoking by banning it in public workspaces. A recent consumer survey has indicated that although smoking is banned in the workplace, people are smoking even more than before, but in their homes and cars. Consumer reaction to the regulation can best be described as:

A) the capture hypothesis.

B) creative response.

C) a feedback effect.

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The regulation intended to reduce smoking led consumers to modify their behavior and smoke more in other “legal” places. This is an example of a feedback effect.

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All of the following are benefits associated with social regulation EXCEPT:

A) lower consumer prices.

B) a less polluted environment.

C) safer, higher-quality products and services.

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Increased regulation tends to causes consumer prices to rise, because producers will generally pass any expenses associated with compliance on to consumers in the form of higher prices.

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All of the following are negative consequences associated with social regulation EXCEPT:

A) a decline in industry competitiveness.

B) increased unemployment.

C) higher production costs.

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While some aspects of social regulation may increase a company’s expense per worker, increased unemployment is generally not associated with social regulation.

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Which of the following statements regarding social regulation is least accurate?

A) Some form of social regulation currently exists in all industries in the United States.

B) Two of the primary goals of social regulation are increased product quality and improved workplace conditions.

C) The benefits of social regulation are easily recognized and can be accurately quantified.

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It is difficult to measure the benefits of social regulation because they may be qualitative rather than quantitative in nature, and the benefits may be spread out over time.