The Difference Between Cost-Of-Service Regulation and Rate-Of-Return Regulation Is That

question 8

Multiple Choice

The difference between cost-of-service regulation and rate-of-return regulation is that

• A) the former sets prices based on actual costs, and the latter focuses on setting prices such that the firm earns a normal rate of return.
• B) the latter sets prices first, and then the firm must keep costs in line if it wants to earn a profit, and the former sets price high enough to cover costs.
• C) the former uses marginal cost pricing and the latter uses average cost pricing.
• D) the former uses average cost pricing and the latter uses marginal cost pricing.

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Definitions:

Powerflow

The mechanical flow path that conducts motive power through a system or component. For instance, the powerflow through a transmission in a specific gear ratio would be the sequential routing of the torque flow path through those gears that are actually engaged.

Drive Axle Carrier

The part of a vehicle's drive axle that houses the differential and other components, helping to transmit power from the engine to the wheels.

Differential Lock

A differential lock is a feature on some vehicles that allows both wheels on an axle to be locked together, ensuring they spin at the same speed for increased traction.

Single-reduction Axle

An axle configuration that uses a single set of gears to reduce the engine speed to the desired wheel speed, providing torque multiplication.