Answer:
Producers have an incentive to lower costs over time so their profits will rise.
P.roducers cannot change their prices when costs change
Step-by-step explanation:
Cost-plus regulation is a system in which public utilities are allowed to charge customers a rate that includes their costs plus a guaranteed rate of return on investment. This rate is typically set by a regulatory agency, and the utility is allowed to earn a profit based on its costs.
Under this system, producers have an incentive to lower costs over time so that they can increase their profit margin. However, this does not necessarily mean that they will enjoy the same level of profit every year, as their costs may fluctuate from year to year.
Producers cannot change their prices when costs change, as their prices are typically set by the regulatory agency. This means that if costs increase, the producer's profit margin will decrease, and they will have a greater incentive to lower costs in the future to maintain their profit margin.
The idea that producers have an incentive to generate high costs by building huge factories or employing many staff is not necessarily true. In fact, under cost-plus regulation, producers have an incentive to keep costs as low as possible, as this will increase their profit margin.