One of the tendencies that is common among firms regulated using rate of return regulation is to

Name: One of the tendencies that is common among firms regulated using rate of return regulation is to
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Question

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Rate of return regulation can incentivize firms to inflate the costs of production because their allowed rate of return is often based on their reported costs. By inflating costs, firms can justify higher prices to regulators, aiming to increase their profits within the regulatory framework.

One of the Tendencies That Is Common Among Firms Regulated