Rate of return regulation will often create an incentive for a natural monopoly to _____ costs.
A) artificially inflate
B) hide
C) contain
D) reduce

Question

Quizplus · Accepted Answer

Rate of return regulation sets a maximum profit that a monopoly can earn. To increase their allowed revenue under this regulation, monopolies might inflate their reported costs, as their profits are calculated as a percentage of these costs.

Rate of Return Regulation Will Often Create an Incentive for a Natural