A Price Cap Is a Price ________

question 102

Multiple Choice

A price cap is a price ________.A price cap might be a more effective way of regulating monopoly than rate of return regulation because under rate of return regulation,________.

• A)ceiling;a firm incurs an economic loss
• B)floor;price is set equal to marginal cost
• C)ceiling;the firm's managers have an incentive to inflate costs
• D)floor;the firm's managers have an incentive to purchase more than the efficient quantity of capital
• E)floor;the firm's managers have an incentive to inflate costs

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Definitions:

Residual Value Guarantees

Assurances provided by a lessee to a lessor that the asset being leased will have a specified minimum value at the end of the lease term.

Lessees

Individuals or entities that obtain the right to use property, plant, and equipment through lease agreements.

Lessors

Individuals or entities that lease or rent an asset to a lessee, often owning the asset during the lease term.

Technological Changes

Developments and innovations in technology that can affect economic and social outcomes.