 The main form of this weakness is the Averch-Johnson effect.Firms regulated in this manner will engage in disproportionate capital accumulation, which in turn will heighten the price level allotted by the government regulator, raising the firm's short-term profits.By spending on unnecessary capital and other extravagant expenses, the firm's revenue requirement (R) is raised as a result of both an increase in operating expenses (E) and depreciation costs (d).