Describe the main problem with rate of return regulation and name an alternative regulatory scheme that has been devised to deal with that problem
What will be an ideal response?
The main problem with rate of return regulation is that a firm might be inclined to inflate its costs, because its price is set at a level that permits the firm to recoup all its costs. Therefore, the firm might incur unnecessary costs that serve the interests of its managers, such as lavish offices, company cars, travel, entertainment, etc. The alternative regulation scheme is price cap regulation. With price cap regulation, the regulating agency sets the maximum price the company can charge. The company is allowed to charge any price below the cap and can keep all (or some) of any economic profit it can make.
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If the price of Pepsi increases, then there will be ___ of Pepsi.
a. An increase in the quantity demanded b. a decrease in the quantity demanded c. a decrease in the demand d. an increase in the demand
The marginal physical product of labor is
A) The additional revenue received by the firm by selling the out of one additional worker. B) The output which labor could produce without other factors of production. C) The amount of extra output that is produced when one extra worker is added and other factors of production are held constant. D) The amount of extra output that is produced when one worker is added and other factors of production are increased proportionally.
Refer to Figure 10.1. If three lights are installed, the people who were responsible for the light being installed each receive a payoff of
A) 4. B) 6. C) 8. D) 10.
The two major trading partners of the United States are
a. Germany and Mexico b. Mexico and Canada c. Japan and Canada d. Canada and Brazil e. Brazil and Japan