When a Firm Is Regulated So That Its Price Enables

question 597

Multiple Choice

When a firm is regulated so that its price enables it to earn a specified target percent return on its capital, the regulation is called

• A) rate of return regulation.
• B) price cap regulation.
• C) earnings limited regulation.
• D) target pricing regulation.

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Definitions:

Joint Costs

Costs incurred in the process of producing two or more products simultaneously, where the costs cannot be individually attributed to the products until a certain split-off point.

Market Value

The present cost at which a service or asset is available for purchase or sale.

Joint Cost Allocation

The process of distributing shared costs among different products, services, or business units.

Split-Off

A process in the production or manufacturing where a certain point separates products or components into distinct paths.