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5. A monopolist has a high set-up cost and produces at a small and fixed marginal cost. Any regulation that forces the monopolist to set
5. A monopolist has a high set-up cost and produces at a small and fixed marginal
cost. Any regulation that forces the monopolist to set price equal to marginal
cost must also provide a subsidy to the monopolist if the monopolist is to stay
in the market. Is this true or false? Explain using an appropriate diagram.
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