Rate of Return Regulation, as Currently Applied to Many Natural

question 594

Multiple Choice

Rate of return regulation, as currently applied to many natural monopolies such as public utilities,

• A) generally involves the use of price caps.
• B) gives the firms an incentive to inflate their costs.
• C) gives the firms an incentive to cut their costs as much as possible.
• D) generally keeps their prices higher than if they were unregulated monopolists.

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Definitions:

Material Breach

A significant failure to perform a part of a contract that permits the other party to either demand performance or terminate the agreement.

Buyer's Obligations

The duties and responsibilities a buyer assumes in a transaction, such as paying the purchase price and complying with the terms of the agreement.

Contract

An agreement between two or more parties creating enforceable obligations.

Substituted Contracts

New agreements that replace and fulfill the obligations of a prior contract, agreed upon by all parties involved.