Rate of Return Regulation Sets the Price at a Level

question 503

Multiple Choice

Rate of return regulation sets the price at a level that enables the regulated firm to earn a specified target percent return on its

• A) total cost.
• B) sales revenue.
• C) capital.
• D) variable cost.

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Definitions:

Deadweight Loss

The drop in economic efficiency due to the inability or failure of a good or service to reach its equilibrium state.

Government Revenue

The total income received by the government from taxes, fees, and non-tax sources like government-owned enterprises and foreign aid.

Tax Rate

The share of an individual's or corporation's income that is subject to taxation.

Deadweight Loss

A loss in total economic welfare that occurs when the free market equilibrium for a good or a service is not achieved, typically due to taxes, subsidies, or market controls.