Managers of a natural monopoly regulated using rate of return regulation have an incentive to
A) exaggerate the firm's costs.
B) underestimate the firm's costs.
C) minimize the monopoly's deadweight loss.
D) make zero economic profit.
E) exaggerate the firm's profit.
A
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Retained earnings are
A) the funds held back to pay out dividends. B) the funds used to pay corporate taxes. C) profits not given out to stockholders. D) the reason there is double taxation.
Efficiency wage theory suggests that
A) workers will be paid less than their reservation wage. B) productivity might drop if the wage rate is too low. C) the government can only set tax rates so high before people will prefer not to work. D) unskilled workers will have a lower turnover rate than skilled workers. E) firms will be more resistant to wage increases as the labor market tightens.