47. The primary reason for government regulation of business is
a. hypercompetition.
b. central planning of the economy.
c. market failure.
d. lobbying efforts by business.
48. Which of the following is not a major reason given for governmental regulation?
a. controlling natural monopolies
b. controlling negative externalities
c. achieving social goals
d. maintaining a trade surplus with foreign countries
49. A market in which the economies of scale are so great that the largest firm has the lowest costs and is able to drive out
competitors is called a(n)
a. natural monopoly.
b. market failure.
c. externality.
d. deregulated industry.
50. Government intervention in monopolistic industries is often brought about by
a. requests from smaller competitors.
b. class-action lawsuits.
c. anticompetitive practices.
d. frequent bankruptcies within the industries.
51. Negative externalities are often referred to as
a. full absorption costs.
b. social costs.
c. allocated costs.
d. environmental costs.
52. Government regulation of business through the control of economic or market variables is a form of
a. negative externality.
b. social cost.
c. economic regulation.
d. indirect cost.
53. Governmental regulations that seek to further societal objectives are examples of
a. social regulation.
b. economic regulation.
c. environmental control.
d. central planning.
54. Social regulation’s focus on people encompasses their roles as all of the following except
a. employees.
b. consumers.
c. citizens.
d. business owners.
55. A 2015 Pew research survey found over 50% of respondents thought that the federal government was doing well in all
areas except
a. responding to national disasters.
b. ensuring safe food and medicine.
c. corporate bailouts.
d. ensuring access to education.
56. Direct costs of regulation are most visible when we look at the number of new agencies created, aggregate
expenditures, and
a. global influence.
b. growth patterns.
c. community response.
d. resource spending.
57. Which of the following is not considered a part of the induced costs of regulation?
a. the effect on innovation
b. the effect on investments in plant and equipment
c. the effect on small business
d. the effect on consumers
58. The primary purpose of deregulation is to
a. decrease competition in the affected industries.
b. remove certain industries from old-line economic regulations.
c. protect the natural environment.
d. allow natural monopolies to form.
59. The dilemma of deregulation is
a. to enhance competition within the industry without harming workers’ status.
b. to enhance competition within the industry without sacrificing applicable social regulations.
c. to prevent monopolies without allowing hypercompetition.
d. to provide business more freedom without completely abandoning governmental authority.
60. Which of the following industries has not been affected by deregulation?
a. financial services.
b. trucking
c. computer software
d. airline
61. Which of the following is not a role increasing government’s complex relationship with business?
a. government is a major purchaser.
b. government can elevate some businesses while devaluing others.
c. government cannot have buying power
d. government can create new businesses through subsidization.
62. A 2015 Pew research survey found that respondents think the government is doing well on many issues except
a. setting workplace standards.
b. protecting the environment.
c. keeping us safe from terrorists.
d. cutting corporate taxes.
63. The newer form of industrial policy is exemplified by:
a. a focus on enabling industrialization.
b. Karl Aiginer’s book, “Industrial Policy: A Dying Breed or a Re-emerging Phoenix?”
c. policy that does not conflict with widely held view on the role of government in the economy.
d. Robert Reich’s book, “The Next American Frontier.”
64. Arguments against privatization include all of these except:
a. social goals.
b. service provisions.
c. public backlash.
d. safety concerns.
65. Which of the following is not an effect of induced costs?
a. small businesses may be adversely affected.
b. new agencies may be created.
c. new investments in plant and equipment may be affected.
d. innovation may be affected.
Provide a short answer to each of these questions. Be sure to fully explain your answer.
66. Why is it incumbent upon government to promote social goals such as safe working environments, clean air, and safe
products?
67. Discuss the ability of the public or its government to establish social priorities.
68. Who determines the public interest?
69. Discuss the likelihood that the United States can develop a planned, successful industrial policy.
70. Distinguish between producing a service and providing a service. Why is this distinction important in the debate over
privatization?
71. In an economy that says it seeks to maximize profits for the individual firm, how can the United States government
justify regulating business to control excess profits?
72. One reason that government might regulate business is to control excessive competition. Government also regulates
business to control natural monopolies. Which situation is worse—monopoly or excessive competition?
73. Compare and contrast economic regulation and social regulation.
74. Is privatization always effective or successful? Give examples of a success and a failure.
75. Discuss the reasons for the overlapping trends of regulation and deregulation.
Utilize the knowledge you have gained to respond to the following essay questions. Your answers should state your
position and use logical arguments and content from this and other chapters in the textbook to support it.
76. Why does government regulate business?
77. According to the authors, the tension between business and government is “a clash of ethical systems.” If it is,
compare such a viewpoint with Neil Jacoby’s comments provided in the text.
78. Industrial policy sometimes allows, or requires, government financial assistance to certain industries (e.g., the airline
industry or the railroad industry). In addition to industry-wide assistance, the government has on occasion provided
bailouts for individual firms. Is bailing out a specific company an appropriate use of government regulation?
79. Using the arguments for and against industrial policy, discuss the benefits and detriments of government support for
the hydrogen economy (i.e., using hydrogen as a primary source of fuel to replace oil).
80. Regulation imposes new costs on business, including direct, indirect, and induced costs. Which type of additional cost
is most important to consider in the regulation process?
81. Given information from this chapter, can governments manage more ethically than capitalism?
82. Articulate a brief history of government’s role in business.
83. Describe the history of the U.S. government as to industries in distress.