One possible solution to improve performance of regulated firms is which of the following?
A)Allow the firm to set its own rate of return.
B)Allow higher rates of return to cover higher cost of better performance.
C)Allow a higher rate of return for better performance.
D)Set lower prices when efficiency improves.

Question

Quizplus · Accepted Answer

Allowing a higher rate of return for better performance incentivizes regulated firms to improve their efficiency and overall performance. This encourages firms to make more investments in research and development, adopt new technology, and improve their operational efficiency. This, in turn, can lead to better services and products, and more competitive pricing. Allowing firms to set their own rate of return (choice A) may lead to abuse and exploitation of customers. Allowing higher rates of return to cover the higher cost of better performance (choice B) may lead to excessive profits and larger price increases for consumers. Setting lower prices when efficiency improves (choice D) does not incentivize firms to improve their efficiency and performance, as they will not see any additional benefits.

One Possible Solution to Improve Performance of Regulated Firms Is