The difference between cost-of-service regulation and rate-of-return regulation is that
A) the former sets prices based on actual costs, and the latter focuses on setting prices such that the firm earns a normal rate of return.
B) the latter sets prices first, and then the firm must keep costs in line if it wants to earn a profit, and the former sets price high enough to cover costs.
C) the former uses marginal cost pricing and the latter uses average cost pricing.
D) the former uses average cost pricing and the latter uses marginal cost pricing.
A
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An increase the expected future price of a good
A) increases its demand. B) decreases its demand. C) increases its supply. D) has no effect on either its demand or its supply.
If the government imposes a specific tax on a monopoly, the consumer's tax incidence
A) can exceed 100%. B) will always be between 0-100%. C) may be negative. D) will be the same as when the tax is imposed on a perfectly competitive firm.