Question #6
Reading: Reading 7 Economics of Regulation
PDF File: Reading 7 Economics of Regulation.pdf
Page: 2
Status: Unattempted
Correct Answer: B
Question
A review of an existing regulation with a sunset clause has revealed that the net regulatory burden is less than the initial estimates. A possible reason for this is that:
Answer Choices:
A. private benefits were underestimated
B. regulatory burden was underestimated
C. indirect costs were underestimated
Explanation
The net regulatory burden is the difference between the regulatory burden and private
benefits. Prior to implementation of the regulation, a potential net regulatory burden is
estimated. A sunset clause requires regulators to use actual outcomes to see if the
regulation should be renewed. This is a comparison between actual and estimated values.
Only when private benefits are underestimated would the actual net regulatory burden be
less than the estimated.