Reading 15: Regulation and Antitrust Policy in a Globalize

statements, following, regarding, black, white

Q1. Which of the following statements regarding regulation is least accurate?

A) Regulators are impartial and their actions are not influenced by industry participants.

B) Regulation has often been advantageous to industry participants because of increased profitability and decreased competition.

C) Regulation has often been disadvantageous to consumers because of higher prices and less product choice.

Q2. The theory of behavior where industry participants are able to exert influence over regulators employed by a governmental regulatory agency is called the:

A) capture hypothesis.

B) share-the-gains, share-the-pains theory.

C) constituency theory.

Q3. In accordance with the share-the-gains, share-the-pains theory of regulators’ behavior, which of the following scenarios is most likely to occur?

A) Regulators allow a portion of an unexpected increase in commodity prices to be charged to consumers.

B) Regulators form policies that are in favor of the special interest lobby of the industry being regulated.

C) The head of a regulatory agency agrees to discuss future price increases with both industry representatives and a consumer group, but in separate meetings.

Q4. A recent heat wave in the Southern United States has significantly increased demand for electricity by consumers. At the same time, utilities providers have experienced higher costs associated with the production of electricity because of inefficient and obsolete methods of production. Which of the following statements is most likely accurate?

A) According to the theory of contestable markets, regulators will allow new entrants into the industry to provide additional capacity.

B) According to the share-the-pains, share-the-gains theory, utilities regulators will allow the providers to pass some of the increased costs to consumers over the next two years.

C) According to the premise of social regulation, utilities regulators will not allow any cost increases to be passed to the consumer because electricity is considered to be a basic necessity of life and must remain affordable.