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What Is an Average Cost Pricing Rule? Why Do Regulatory

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What is an average cost pricing rule? Why do regulatory agencies use it for natural monopolies?


Definitions:

Variable Costs

Expenses that change in proportion to the activity of a business.

Debt-to-Equity Ratio

A financial metric that shows the comparative ratio of equity to debt employed to fund a company's assets.

Return on Equity

A measure of a corporation's profitability, calculated as net income divided by shareholders' equity, indicating how effectively equity is being used.

Return on Assets

A measurement of profitability indicating how efficiently a company uses its assets to generate earnings.

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