Which of the following is an outcome of regulation?

The outcome of regulation that addresses market failures is significant for several reasons. Market failures occur when the allocation of goods and services by a free market is not efficient, leading to a net social welfare loss. Regulations are put in place to correct these failures by ensuring that the market operates more effectively and equitably.

For instance, regulations can help mitigate issues such as monopolistic practices, negative externalities (e.g., pollution), information asymmetry (e.g., when buyers and sellers have different information), and public goods provision (where the market does not supply certain goods adequately). By implementing regulations, governments can promote competition, protect consumers, and enhance overall economic efficiency.

This corrective function contrasts with the other options presented, which do not reflect the principal purpose of regulation. Promoting monopoly powers would exacerbate market failures instead of addressing them. Encouraging underreporting of income undermines the integrity of the tax system and leads to inefficiencies. Lastly, eliminating all business risks is unrealistic, as some level of risk is inherent in business activities, and regulation can only help manage or mitigate certain risks, not remove them entirely. Thus, the focus on addressing market failures illustrates why this is the correct outcome of regulation.