Some economists who use the public choice model to explain the ways government intervenes in the economy believe that regulatory capture results when an agency or commission is given authority over a particular industry or product.Which of the following is the best example of regulatory capture?
A)The Food and Drug Administration (FDA)has increased the time and expense pharmaceutical firms incur to receive approval to market a new drug.
B)A federal government agency hires more employees than it requires to regulate an industry because it does not seek to minimize costs or maximize the agency's profits.
C)The head of an agency is required to testify before Congress because Congress controls the size of the agency's budget. Congress "captures" the agency because of its budget authority.
D)Firms that were regulated by the Interstate Commerce Commission (ICC)attempted for many years to influence the ICC's actions.

Question

Quizplus · Accepted Answer

Firms attempting to influence the regulatory agency overseeing their industry is a classic example of regulatory capture. The fact that these firms attempted to influence the ICC's actions suggests that the ICC may have been more interested in catering to the industry it was designed to regulate than in effectively regulating it.

Some Economists Who Use the Public Choice Model to Explain