Which is the most valid criticism of the regulation of natural monopolies and other firms subject to regulation by regulatory commissions?

A) It is difficult to find enough honest people to serve on regulatory commissions.
B) Such regulation is unnecessary and amounts to creeping socialism.
C) Many members of such commissions are appointed rather than being elected.
D) Regulated firms may have little incentive to contain costs since they are assured a "fair" return above costs.

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Urijah Reign · Accepted Answer

Final Answer : D, Explanation :  Regulated firms may indeed have less incentive to control costs because they are often guaranteed a return on their costs. This can lead to inefficiency and higher prices for consumers, as firms are not motivated to keep costs low when they can pass these costs directly to consumers with a markup.

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