In cost plus regulation, regulators calculated the average cost of production, added in an amount for the normal rate of profit the firm should expect to earn, and set the price for consumers accordingly. In price cap regulation, the regulator sets a price that the firm can charge over the next few years. What is the problem of price cap regulation? Group of answer choices It will cause long term certainty in the market. It will not work if the price regulators set the price cap unrealistically low. It will not work if the price regulators set new prices every six months. Low level managers will have too much power.
In cost plus regulation, regulators calculated the average cost of production, added in an amount for the normal rate of profit the firm should expect to earn, and set the price for consumers accordingly. In price cap regulation, the regulator sets a price that the firm can charge over the next few years. What is the problem of price cap regulation? Group of answer choices It will cause long term certainty in the market. It will not work if the price regulators set the price cap unrealistically low. It will not work if the price regulators set new prices every six months. Low level managers will have too much power.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
In cost plus regulation, regulators calculated the average cost of production, added in an amount for the normal rate of profit the firm should expect to earn, and set the
What is the problem of price cap regulation?
Group of answer choices
It will cause long term certainty in the market.
It will not work if the price regulators set the price cap unrealistically low.
It will not work if the price regulators set new prices every six months.
Low level managers will have too much power.
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