If a Public Utility Is Subject to Average-Cost Pricing Regulation,it

question 13

Multiple Choice

If a public utility is subject to average-cost pricing regulation,it will:

• A) earn a normal rate of return.
• B) produce the socially efficient level of output.
• C) suffer economic losses without a subsidy.
• D) earn an above-normal rate of return.

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Definitions:

Profit Maximization

The process or strategy used by businesses to determine the price and output level that leads to the highest profit.

Demand Curve

A graphical representation that shows the relationship between the price of a good or service and the quantity demanded for it over a given period of time.

Marginal Product

Marginal product refers to the additional output produced as a result of adding one more unit of a specific input, while holding other inputs constant.

Resource

An economic or productive factor required to accomplish an activity, or as a means to undertake an enterprise and achieve desired outcome.