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Increase social welfare by minimizing deadweight loss

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Reference no: EM132478805

Problem: Bugsy is the only loanshark in Miami. He is reviled throughout the community for his practice of charging higher interest rates to more desperate borrowers. Local consumer credit advocates lobby Miami's mayor to impose regulations on Bugsy.

If the mayor's objective is to increase social welfare by minimizing deadweight loss, what regulation should he enact?

Choose only one

Nothing; social welfare is already being optimized

The mayor should cap the maximum interest rate Bugsy can charge

The mayor should cap the number of loans Bugsy can make

The mayor should tax Bugsy's transactions

Reference no: EM132478805

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