Asked Feb 2, 2020

Refer to Diagram 2 above, which represents a monopolist firm, to answer the following questions.

product = marginal product x selling price per unit).


  1. What quantity will this firm produce and what price will it charge?


  1. Suppose this monopolist firm becomes regulated and the regulatory agency wants to achieve economic efficiency. What price would the agency require the monopoly to charge and what quantity will the firm produce as a result?


  1. If the monopolist charges a price that will achieve economic efficiency, will the monopolist be making a profit or loss? Explain your answer with a calculation.



  1. Now suppose the government regulates the monopoly by imposing a price ceiling of $60. How many units will be produced? Will every customer who is willing to pay the ceiling price of $60 be able to buy the product? Explain why or why not.


  1. Based on the price ceiling of $60, what will be the profit of this monopolist?

Price/Cost per unit

Image Transcriptionclose

Price/Cost per unit $125 $90 560 ATC MC $40 MA 1020 1240 2150 2500 Quantity


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