What is price cap regulation?
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Price cap regulation is a type of regulation where regulator sets a price for the firm. The regulation takes into account industry averages for operating efficiencies. Such a price cap declines over time. Price Cap Regulation gives firms strong incentives to reduce costs and improve efficiency while at the same time removing the negative incentives to inflate costs.
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Understand Government Regulation Understand how governme nt regulation can serve as a restriction to private enterprise. In the U.S., the interaction between the governme nt and private enterprise is commonly referred to as the "free enterprise system. " This system in turn provides the base which supports capitalism. Use the graphic above to write a paragraph explaining how government regulation can restrict private enterprise. Consider the following questions: What is private enterprise? How is private enterprise related to cap italism? What is government regulation? How can government regulation restrict private enterprise?