Why do some utilities have an incentive to exaggerate their costs of production?
What will be an ideal response?
Because utilities are generally allowed to charge prices that cover their average cost of production, a utility might want to incur higher than normal costs (maybe from lush carpets, hunting lodges, tickets to sporting events, and so forth). If the utility exaggerates its costs, the regulators are likely to simply order higher rates to cover the higher costs, and so the utility executives can enjoy benefits (the carpet, hunting lodge, sporting events) without incurring any personal costs.
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A creative entrepreneur is one who knows how to
a. Run a business b. Escape the burden of taxes c. Profitably exploit money making opportunities d. All of the above
The monetarists think that the growth of the money supply should be approximately equal to the growth of ____________.
Fill in the blank(s) with the appropriate word(s).
The central bank for the euro area tries to achieve accountability and transparency through a:
A. specific target for the dollar euro exchange rate. B. following the monetary policy guidance of the European Parliament. C. standard numerical objective for inflation over the medium term. D. specific target for unemployment and economic growth.
Allocative efficiency requires that
a. MC equals ATC. b. MC equals P. c. AR equals AFC. d. MC equals MR.