Question
Consider a monopolist facing the following demand curve Price: 24, 22, 20, 18, 16, 14, 12, 10, 8, 6 Quantity Demanded: 1, 2, 3, 4,
Consider a monopolist facing the following demand curve
Price: 24, 22, 20, 18, 16, 14, 12, 10, 8, 6
Quantity Demanded: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10
Let's assume that the monopolist has a constant marginal cost of 8 AND a fixed cost of 28.Now let's imagine that the government wants to make this market more efficient by putting a price ceiling on the good.
1. Can they make it perfectly efficient?If not, why not?(Assume everything is in the long run here.)
2. If they want to make this as efficient as possible, where should they set the price ceiling? (I'm expecting a number here.) Show this on a graph.Identify the quantity, consumer surplus, and dead weight loss if there is one.(You don't need a number for CS and DWL but make sure to give me the price and quantity.)Make sure to include any additional curves that may have been necessary to identify the right price ceiling.
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