Distinguish between cost-of-service regulation and rate-of return regulation. What problem is inherent in both types of regulation?
What will be an ideal response?
Cost-of-service regulation allows the regulated companies to charge only prices that reflect the actual average cost of providing the services to the customers. Rate-of-return regulation allows regulated companies to set prices that ensure a normal rate of return on investment. A problem with both types is quality of service. Firms charge a regulated price but if quality deteriorates the price per constant-quality increases. Quality is hard to measure so it is hard for the regulators to control.
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Higher rates of inflation
a. reduce real marginal tax rates, increasing savings and investment. b. increase real marginal tax rates, reducing savings and investment. c. reduce real marginal tax rates, reducing savings and investment. d. have no effect on real marginal tax rates, and no effect on savings and investment. e. none of the above.
Which of the following is a simultaneous decision game?
A) Tic-tac-toe B) Chess C) Poker D) Rock-paper-scissors
The balanced budget multiplier is equal to one
a. True b. False Indicate whether the statement is true or false
Answer the following statement(s) true (T) or false (F)
1. In Average and Marginal Costs, the firm will reach peak production when the AFC curve reaches zero.
2. When a firm’s marginal product rises, its marginal cost rises in proportion.
3. When a firm’s marginal product is increasing, its average cost is decreasing.
4. In an appliance factory, the average cost of producing a refrigerator will be relatively high both when very few units are being produced and when production output is especially large.
5. Economists define the long run as anything more than one year in the future.