Suppose the Government Imposes Fair-Returns Pricing on a Monopolist

Multiple Choice

Suppose the government imposes fair-returns pricing on a monopolist.This policy creates incentives for the firm to overinvest in capital.As a result,the firm will have ________.

A) a strong incentive to minimize costs of producing a given level of output
B) no incentive to minimize costs of producing a given level of output
C) a strong incentive to innovate
D) a strong incentive to produce new goods