1. “Regulatory capture theory” refers to the concept that,

a.Market participants have less information than regulators so market participants in general get captured by their regulator(s)

b.Regulators have less information about specific markets than do market participants, leading to regulators becoming captured by those they regulate

c.The technocracy gets captured by political appointees because the permanent government bureaucrats have less information than recently nominated political appointees

2.The reason(s) why the Affordable Care Act of 2010 is an example of rent-seeking and regulatory capture is because,

a. Members of the legislature and their employees know more about healthcare than do doctors and their patients so the Act was able to decrease the rate of inflation in healthcare

b. The Act required a nation-wide market for health insurance instead of being regulated by each state separately (which creates local oligopolies), therefore this increased the extent of the market, giving better health-insurance coverage at lower prices.

c. Congress depended on the healthcare insurance industry to write the Act, and in return agreed to use taxpayer money to ensure that the industry would make profits despite having to make below-market insurance available to more than 25 million people

3. Krueger 1974 “The Political Economy of the Rent-Seeking Society” illustrates that rent-seeking (protectionism) in international trade means that countries who implement this rent-seeking

a.Produce and consume at a level greater than their Production Possibility Frontier

b.Produce and consume at a level less than their Production Possibility Frontier

c.Increase their comparative advantage and the variety of goods available in the domestic market

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1Regulatory capture theory refers to the concept that b Regulators have less information about speci... View the full answer