Quiz Ch. 8-11

Question 1

Why Regulation

Answer 1

Government intervention in a free enterprise economy - justified only when market is unable to serve the public interest - such as, in instances of market failure

Question 2

Market failure attributed to

Answer 2

Imperfect information
Monopoly
Externalities
Public goods

Question 3

Three general arguments: Philosophy and Polotics

Answer 3

Regulation necessary for the protection and general welfare of public

Regulation developed at the request of industry - operated primarily for the benefit of industry

Bureaucrats who perform government regulation are themselves a powerful force in maintaining and expanding that regulation

Question 4

Commerce clause of the U.S. Constitution:

Answer 4

Broadly specifies the power accorded to the federal government to regulate business activity
Affords Congress exclusive jurisdiction over foreign commerce
Federal power has broad reach over activities that are economic in some sense

Question 5

Supremacy clause

Answer 5

sometimes state or local law conflicts with federal law

Confusion in the middle ground of interstate commerce - regulation by the federal government or state governments or both may be permissible

Question 6

Issue - whether regulation is unconstitutional because

Answer 6

It discriminates against interstate commerce or

It unduly burdens interstate commerce such that the burden imposed clearly exceeds the local benefits

Question 7

Globalism vs Nationalism

Answer 7

Rules are generally common in Europe
This tendency renders the EU nations less competitive on the world scene
Europeans often regard rules as necessary for safety and fairness

Rules are generally less common in America
For example, proof of chemical safety prior to market entry is not required by law

Question 8

Standardization

Answer 8

Consistent global rules achieving seamless international trade would bring dramatic savings
But that goal is far off

Question 9

Summary of State and Local Regulation

Answer 9

States primarily responsible for regulating the insurance industry - involved in regulating banking, securities, and liquor sales

Local regulation is much less economically significant than state regulation

Local government intervention in business typically involves various licensure requirements

Question 10

Administrative Agencies and the Regulatory Process

Answer 10

Agency - according to federal law, it is any government unit other than the legislature and the courts
The administrative law governing those agencies technically addresses the entire executive branch of government

Question 11

Two kinds of federal agencies

Answer 11

Executive - located within departments of the executive branch of the government
Independent - created by the Congress via statutes

Question 12

Agency duties

Answer 12

Control of supply
Control of rates
Control of conduct
    Information
    Standards
    Product banishments

Question 13

Agency action guided generally by the 1946 Administrative Procedure Act (APA)

Answer 13

Congress enacted to provide a framework for agency rule-making and to detail broad standards for judicial review of agency decisions

Question 14

Executive Functions

Answer 14

Basic executive duty - implement the policy provided in the enabling legislation and in the agencies’ own rules and regulations
Agency activity consists of performing mundane, repetitive tasks
Agencies enter into contracts, lease federal lands, register securities offerings
Agencies award grants, resolve tax disputes, settle workers’ compensation claims, administer government benefits to the citizenry
Part of the agencies’ executive duties is the protection of the public by ensuring compliance with laws and regulations

Question 15

Legislative Functions

Answer 15

Agencies create rules that are laws

Agencies enact three types of rules:
Procedural rules - delineate agency’s internal operating structure and methods
Interpretive rules - offer agency’s view of meaning of those statutes for which agency has administrative responsibility
Legislative rules - policy expressions having the effect of law

The rule-making process: APA provides informal and formal rule-making processes for legislative rules

Hybrid rule-making: informal rule making with additions in the form of some trial elements - has effect of providing a more detailed record without all of the procedural requirements of formal rule-making

Question 16

Judicial Functions

Answer 16

Agencies commonly must turn to judicial proceedings to enforce agency rules

Issues facing agencies could properly be resolved either by:
Rule-making - involves standards to be applied to the future conduct of a class of unspecified parties
Adjudication - addresses specific parties involved in a specific present or past dispute

Typically, after an investigation, a violation of a statute and/or rule may be alleged - affected parties are notified

Failing a settlement, the parties proceed much as in a civil trial - ordinarily the case is heard by an administrative law judge

Question 17

Executive constraints

Answer 17

The president appoints top administrators for various agencies
Influences conservative or liberal slant of the agency

Question 18

Congressional constraints

Answer 18

Congress creates and can dissolve agencies
Congress controls agency budgets
Congress encourage or discourage particular agency action

Question 19

Judicial review

Answer 19

Agency rules and orders may be challenged in court