Question

Regulation

A. solves market failures of all size.
B. always increases consumer surplus.
C. passes the costminusbenefit test.
D. None of the above.

Answer 1

Answer: Passes the cost minus benefit test

Explanation: Regulation can be defined as the rules passed by the authorities to cease or control any specific activity going in the market. These are generally implemented by the govt. of the country or as such similar authority designated to do so.

These are made to benefit the society as a whole and will only be passed if the benefit of implementing such rule exceeds its cost the society bears as a whole.