Describe the difference between social interest theory of ...

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Describe the difference between social interest theory of regulation and the capture theory of regulation.
 
  What will be an ideal response?

Question 2

Which of the following occurs if the production of a good gives rise to positive externalities?
 
  A) The marginal social cost curve lies to the right of the supply curve.
  B) The marginal social cost curve lies to the left of the supply curve.
  C) The marginal social benefit curve lies to the right of the demand curve.
  D) The marginal social benefit curve lies to the left of the demand curve.

[laurnthompson]

Answer to Question 1

Both are theories of regulation but they differ according to what they see as to the goal of the regulation. The social interest theory assumes that regulation that seeks an efficient use of resources. It asserts that the political process works to eliminate deadweight loss by using appropriate regulations. The capture theory proposes that producers bend the regulators to their will so that resources are not used efficiently because regulated market outcomes favor producers. Everyone else but producers bears the cost of this regulation. Because this cost is a small amount per person, no one finds it worthwhile to propose legislation to avoid it.

Answer to Question 2

C