A basic problem with public regulation is that
A) regulatory agencies exist at the state but not the federal level of government and therefore lack power.
B) it is difficult to decide what constitutes a fair rate of return.
C) it inevitably expands so that ultimately all production is nationalized.
D) regulatory commissions set only minimum prices that regulated firms can charge, thus promoting excessive entry of new firms into regulated markets.
E) regulation requires that modestly staffed government agencies make the day-to-day operating decisions of regulated firms.

Question

Quizplus · Accepted Answer

One of the basic problems with public regulation is that it is difficult to decide what constitutes a fair rate of return. Regulated firms argue that they need to earn a certain level of profit to cover their costs and attract investment, while consumers and regulators want prices to be as low as possible. Deciding on an appropriate rate of return is a difficult task that requires balancing competing interests.

A Basic Problem with Public Regulation Is That