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

The rate-of-return regulated public utility can have incentive to price some services too high and others too low, relative to efficient prices.

Indicate whether the statement is true or false

ANSWER

T As in its tendency to favor capital over other inputs, the rate-of-return regulated public prefers to sell services that require more capital. So it may set the price of a peak-load service low in order to create more demand for capital, and price off-peak service high to make profit that the capital can be used to justify.