When a Regulatory Agency Uses Rate of Return Regulation,the

question 303

Multiple Choice

When a regulatory agency uses rate of return regulation,the

• A) agency is able to eliminate the deadweight loss.
• B) firm's managers have an incentive to inflate the firm's costs.
• C) regulated firm's profit must be maximized for the market to be efficient.
• D) regulated firm must receive a government subsidy.
• E) the agency is using a form of marginal cost pricing.

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Definitions:

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Government program providing financial assistance to people with inadequate or no income, especially the elderly, disabled, and survivors.

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A system of government where powers and responsibilities are divided between a national government and smaller administrative units, often including states or provinces.