The rate-of-return regulated public utility can have incentive to use

The rate-of-return regulated public utility can have incentive to use more capital than is efficient relative to other inputs.

Indicate whether the statement is true or false

ANSWER

T The rate-of-return regulated public utility earns profit based on how much capital it uses, and if the return it is allowed to earn per unit of capital exceeds its cost of capital, which is usually the case, it will want to use more capital so it can keep more profit.