Which of the following best describes the difference between cost-of-service regulation and rate-of-return regulation?
A) Costs determine prices in cost-of-service regulation and prices determine costs in rate-of-return regulation.
B) Costs determine prices in cost-of-service regulation and prices are set in rate-of-return regulation so the firm can make a normal rate of return.
C) Variable costs determine prices in cost-of-service regulation and prices are set in rate-of-return regulation so the firm can make an economic profit.
D) Regulators determine prices in cost-of-service regulation and market forces determine prices in rate-of-return regulation.
B
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Indicate whether the statement is true or false
According to the new classical economics, predictable changes in aggregate demand
a. affect the level of real output. b. will not affect the level of real output. c. may or may not affect the level of real output. d. None of the above