Critics of the regulation of natural monopolies contend that:
A. regulation increases the incentive of firms to lower costs.
B. regulated firms may use creative accounting to reduce costs, prices, and profits.
C. when rates of return are based on the value of real capital, an uneconomic substitution of
labor for capital may occur.
D. the industry may "capture" or control the regulatory commission.
Answer: D
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A) decrease; increase B) decrease; decrease C) increase; increase D) increase; decrease
Which of the following REDUCES equality of income or wealth relative to the market distribution?
A) government payments to the poor B) a regressive income tax C) high taxes on bequests D) non-assortative mating
A person is dynamically inconsistent if:
A. lapses in self-control never occur. B. his preferences over the alternatives available at some future date do not change as the date approaches or once it arrives. C. he does not always follow through on his plans and intentions. D. All of these are sufficient for dynamic inconsistency.
Suppose you invest $10,000 at 7% interest to be withdrawn by your heirs in 100 years. According to the rule of 70, approximately how much will your heirs be able to withdraw?