Price cap regulation is defined as regulation that
A) imposes a price ceiling on the regulated firm.
B) encourages firms to exaggerate costs to increase profits.
C) is essentially the same as rate of return regulation.
D) uses marginal cost pricing to ensure efficient output.
E) uses average cost pricing to ensure costs are covered.

Question

Quizplus · Accepted Answer

Price cap regulation sets a limit or ceiling on the prices that the regulated firm can charge for its goods or services. This is done to protect consumers from monopolistic practices and ensure fair prices.

Price Cap Regulation Is Defined as Regulation That