Under cost-plus regulation, a regulated firm is permitted to charge prices that cover the explicit cost of production plus a markup to cover the:
A)opportunity cost of the resources supplied by the firm's owners.
B)extra cost associated with the state ownership of natural monopolies.
C)cost of winning a government contract.
D)owner's economic rent.

Question

Quizplus · Accepted Answer

Cost-plus regulation is a method of regulation under which the regulated firm is permitted to charge prices that cover the explicit cost of production plus a markup to cover the opportunity cost of the resources supplied by the firm's owners.

Under Cost-Plus Regulation, a Regulated Firm Is Permitted to Charge