The Averch-Johnson effect, we claimed that the allowed rate of return (s) must exceed the cost of capital (r). Suppose that s lt; r. What would this...

The Averch-Johnson effect, we claimed that the allowed rate of return (s) must exceed the cost of capital (r). Suppose that s < r. What would this mean for the profitability of the utility? But what if s = r. what would happen to the utility's preferences for capital versus labor and why is this important for the electric power?