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1.Explain why economists advocate that regulators use marginal-cost and not average-cost pricing. Also explain why regulators favor...

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Economics

1.Explain why economists advocate that regulators usemarginal-cost and not average-cost pricing. Also explain whyregulators favor average cost pricing.

2. Provide the formula for how a Public Utility Commissiondetermines the rate-of-return. Then relate it to the Averch-JohnsonEffect.

3. Draw a graph that shows the social welfare loss from a flatrate as compared to using a peak and off-peak rate. Explain.

4. Why is it a challenge to utilities to promote energyefficiency? How might decoupling reduce the challenge?

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Question 1 Explain why economists advocate that regulators use marginalcost and not averagecost pricing Also explain why regulators favor average cost pricing Solution Explain why economists advocate that regulators use marginalcost and not averagecost pricing Economists advocate that regulators use marginalcost pricing rule because of attaining the economic efficiency to regulated utilities and also to achieve the efficient level of    See Answer
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