Which of the Following Statements Regarding Economic Regulation Is TRUE

question 143

Multiple Choice

Which of the following statements regarding economic regulation is TRUE?

• A) Economic regulation has failed by insisting that firms must be allowed to earn a normal rate of return.
• B) Rate-of-return regulation has been much more effective than cost-of-service regulation.
• C) Economic regulation deals only with rates of return, and not with prices.
• D) Economic regulation deals mainly with prices firms charge, but firms can alter their return by altering quality of service, effectively raising the price per constant-quality-unit.

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Definitions:

Finished Goods Inventory

The stock of completed products that are ready to be sold but are still in the company's inventory.

Direct Labor Costs

Costs associated with employees who are directly involved in the production of goods or services.

Manufacturing Overhead

All indirect costs associated with manufacturing beyond direct materials and direct labor, such as utilities, depreciation, and maintenance of equipment.

Raw Materials

Basic materials used in the production process to manufacture finished goods.