2. A price cap regulation is often combined with _______ in case the regulator s

Question

2. A price cap regulation is often combined with _______ in case the regulator sets the cap too high.

A.earnings sharing regulation

B.marginal cost pricing

C.average cost pricing

D.price discrimination

2 of Barbara owns a truck stop on the prairies, miles from anywhere Price and cost (dollars per meal) The graph shows her marginal revenue and marginal cost curves and the demand curve she faces 1 of How many fewer meals does Barbara serve than she would if the market were perfectly competitive? 2 of Barbara serves competitive fewer meals a week than she would if the market were perfectly 0 of 3 of 2MC 2of comp MR 0 20 40 60 80 100 120 140 160 Quantity (meals per week)

Explanation / Answer

MR = MC = 2

corresponding demand = 3.5

in perfect competetion case we have,

P= Mc = demand = 2

so, barbara serves 3.5-2 = 1.5 fewer meals a week

2. a) earning sharing regulation

In case regulator sets price cap to high then price cap regulation is combined with earnings sharing regulation because under such condition profit that exceed target lavel must be shared with firm customers.

thanx

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