Which of the following statements regarding economic regulation is TRUE?
A. Economic regulation has failed by insisting that firms must be allowed to earn a normal rate of return.
B. Economic regulation deals mainly with prices firms charge, but firms can alter their return by altering quality of service, effectively raising the price per constant-quality-unit.
C. Rate-of-return regulation has been much more effective than cost-of-service regulation.
D. Economic regulation deals only with rates of return, and not with prices.
Answer: B
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