12. The U.S. government built and runs the Smithsonian Museums in Washington, D.C. Admission to all of the museums is free.
We can conclude that:
A. There is a principal-agent problem.
B. Special interests engaged in rent-seeking behavior.
C. Private enterprise wouldn’t have provided the free service.
D. There is regulatory capture.

Question

12. The U.S. government built and runs the Smithsonian Museums in Washington, D.C. Admission to all of the museums is free. 
We can conclude that:
A.    There is a principal-agent problem.
B.    Special interests engaged in rent-seeking behavior.
C.    Private enterprise wouldn’t have provided the free service.
D.    There is regulatory capture.

BlackTom AI · Accepted Answer

This question asks us to interpret what the fact that the Smithsonian Museums in Washington, D.C. have free admission implies about economic and political concepts.
Option A: 'There is a principal-agent problem.' A principal-agent problem arises when agents (those who act on behalf of principals) have different incentives than the principals, leading to potential misalignment. While it is possible to discuss governance issues in a large museum system, the statement given does not by itself establish misaligned incentives between principals and agents. It’s not the strongest or most direct inference from free admission.
Option B: 'Special interests engaged in rent-seeking behavior.' Rent-seeking involves spending resources to capture economic rents through the political process rather than by productive activity. The fact that admission is free does not demonstrate that special interests spent resources to secure favorable regulations or funding in a way that extracted rents; the free admission is a public provision feature, not direct evidence of rent-seeking.
Option C: 'Private enterprise wouldn’t have provided the free service.' This is a plausible inference: providing free-admission museums is typically funded by government appropriations, philanthropy, or public subsidies, and private for-profit enterprises typically charge admission to cover costs. The absence of a market incentive to provide universally free admission makes this inference reasonable, given the public-good nature and non-excludability of museum access. In short, free entry is more consistent with government provision or public funding than with a typical private-market arrangement.
Option D: 'There is regulatory capture.' Regulatory capture occurs when regulated industries exert influence to favor the firms they regulate, leading to policies that benefit those industries at the expense of public welfare. The Smithsonian, as a government-run institution, does not present evidence of regulatory capture from the admission policy alone. The statement about free admission is not a direct indicator of capture by private interests.
In summary, while some options touch on legitimate economic concepts, the most direct and defensible inference from free admission to all Smithsonian museums is that private enterprise would not typically provide such a universally free service, making option C the strongest claim among the choices.

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