The capture theory of regulation predicts that
A) regulators capture the firm's economic profit and transfer it to consumers as consumer surplus.
B) regulators capture the firm's economic profit and transfer it to themselves.
C) regulation helps producers to maximise profits.
D) resources are used efficiently.
E) regulators eliminate the deadweight loss a monopoly can create.

Question

Quizplus · Accepted Answer

The capture theory of regulation suggests that regulatory agencies may come to be dominated by the industries they are charged with regulating, leading to regulations that benefit the producers at the expense of the general public. This can result in regulations that help producers maximize their profits.

The Capture Theory of Regulation Predicts That