Practice question · Multiple choice
Labour, consumer and environmental movements all ended in regulation that raised firms’ costs. Why do established firms often end up supporting such rules?
Hints
- Ask what a fixed compliance cost does to a small firm versus a large one.
- Who is kept OUT by a standard?
Show the answer
B. Because a compliance cost is heavier for a small entrant
Why
A fixed cost spread over more units is a smaller unit cost. This is why regulatory capture is a standard finding rather than a cynical one, incumbent support and public benefit are not exclusive.
Practise Social Change and Environment
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