When a Regulatory Agency Uses Rate of Return Regulation, the

question 247

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)agency is using a form of marginal cost pricing.

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Definitions:

Ratio

An expression that compares two quantities in a specified order.

Fuel Mix

The combination of various fuel sources used to generate energy or power.

Two-Cycle Engine

An internal combustion engine that completes a power cycle with two strokes of the piston during only one crankshaft revolution.

Ratio

A mathematical expression that represents the relationship between two numbers, showing how many times one value contains or is contained within the other.