Your answer: D was incorrect. The correct answer was B) The U.S. government has taken an active stance against the tobacco industry by declaring it to be a drug and decreeing that the FDA should have jurisdiction over the industry. (Study Session 11, LOS 42.d) Question: Which global industries would the US government involvement most likely represent an example of a NEGATIVE external influence? The answer choices were a: oil industry b: tobacco industry c: cable tv industry d: soft drink industry HOW??
b, but I am not sure I really understand the question…just feel govt involvment in this is bad.
that was my line of thinking…thats why i chose D…because soft drink industry should be kept as a competitive industry so regulation would be bad. anyone have a rationale for this?
This one is explained on page 200 of the CFAI… I think the main point of the question is to say that government regulation isn’t always bad. The Oil industry has benefited from gov’t involvement by receiving favorable depreciation allowances. (Re: “Special Interests”) Cable TV: I think there was an example in the book where Cable TV companies were allowed to charge a fee that covered costs and allowed for reasonable fee increases after creating an artificial ‘monopoly’ for the industry. Soft Drinks: this one was hard. I think the reason why this wasn’t correct was b/c there was no example of gov’t involvement having an adverse effect. ?? My guess. Nobody got hurt drinking soda pop. Tobacco: By declaring tobacco as a drug (FDA), every player loses.
this isn’t fair, haha thanks though. wow.
I just thought about the lawsuit, at least it got me to the right answer.