Details Title: Bus 404 Description: chapter 10 Total Flash Cards: 18 Created: 05/17/2009 18:54:57		New Users: To study from this flashcard set, or to create your own your own study flash cards, REGISTER HERE. Existing Users: CLICK HERE. Additional Business Flashcards
Cards in this set: Term Regulation Definition Government intervention in econo9mic activity using: -Commands -Controls -Incentives Term Participation in Rule Making Definition Interest goups rank participation in rulemaking as more important than campaign contributions or litigation in nonmarket activities Term Periods of Regulatory Change Definition Populist era –  late 1880’s – farmers regulation rates * Progressive era and the New Deal –  late 1930’s – 1940’s – industries * Social regulation  1960’s –1970’s – safety, health, & environment * Economic deregulation –  intended to reduce prices     Term Constitutional Basis for Regulation Definition Section 8 of Article 1 gives Congress the power to regulate commerce among the several states. 5th Amendment – due process 14th Amendment – applies the due process requirements to the states Term Regulatory Agencies Definition Independent Commissions Executive Branch Agencies Term   Administrative Procedure Act (1946)   Definition APA requires notice and Actions must not be arbitrary Capricious, or An abuse of discretion Term Rule Making Definition   Rulemaking is the most important activity of most regulatory agencies. These agencies are influenced by the executive branch via appointments and congress via budgetary and oversight authorities. Courts influence regulation via review of regulatory actions for constitutionality and for consistency with statutes.   Term Explanations for Regulation Definition Market imperfections theory predicts that regulation will be instituted to improve economic efficiency by correcting imperfections. Political theory predicts that interest groups seek regulation to serve their interests. Term   Market Imperfections   Definition natural monopoly externalities pecuniary nonpecuniary public good asymmetric Information Moral Hazard Term Natural Monopoly Definition   one firm can produce a given set of goods at a lower cost than can any large number of firms.   Term Pecuniary Definition   actions of one affects others through changes in prices of goods and services.  New plant, wages increase, supply and demand.  Does not provide a rationale for regulation.   Term nonpecuniary Definition   actions of one affects the preferences or production opportunities of others.  Autos, pollution.  Divergence of private costs from social costs.  Does provide a rationale for regulation.     Term Public Goods Definition consumption by one does not reduce its availability for others.  Apple vs. National Defense.  Preferences affect goods. Term Asymmetric Information Definition one has different (private) information at the time they act.  Used car example.  Liability is an alternative to regulation.-Let the people sue eachother - someone has an advantage because they have info Term Moral Hazard Definition behavior induced when people do not bear the full consequences of their actions.  Insurance.  Controlled by structuring incentives to take into account in decision making.  Co-pays. Term Government Imperfections Definition “…in regulating, the cure may be worse than the disease…” - if industry controlled itself it could be better Term Definition Term Political Economy of Regulation Definition 1) Economic regulation is initially imposed to adress market imperfections...Regulaters begin to see problems as their own... Over time it will evolve to serve the interests of the regulated industry. 2) Regulation is supplied in response to the demands of interest groups  3)Regulation is shaped by the efficiency consequences of policy alternatives and the policy responses to those consequences.... Regulatory policy is a product of interest group actions and institutions.