If the public utility commission allows a water company to earn a normal profit, then it is enforcing a(n) _____ rule.
A) marginal cost pricing
B) market pricing
C) average cost pricing
D) public interest

Question

Quizplus · Accepted Answer

When a public utility commission allows a water company to earn a normal profit, it typically enforces an average cost pricing rule. This means the price set for water services covers the total costs (including capital, labor, and materials) divided by the quantity of units sold, allowing the company to cover its costs and earn a normal profit without making excessive profits.

If the Public Utility Commission Allows a Water Company to Earn