DanishDesign A / S has recently developed the unique digital school desk solution

MultiDigi for kindergartens, schools and universities, with the following demand P and

average cost AC.

P = 3,000 - 3Q

AC = 1 500 = constant

where P stands for price per unit MultiDigi and Q is the number of units MultiDigi measured in 1,000.

There are no substitutes or competitors for MultiDigi. The authorities set one

maximum price of 2,000 per unit MultiDigi to promote wide and fast distribution of

MultiDigi.

a) How does the manufacturer's profit and market power change as a result of price regulation

for MultiDigi?

Tip: Use the Learner Index to calculate and discuss market power.

b) The authorities want the maximum production volume of MultiDigi from a) and are considering to

adjust the maximum price accordingly.

Which maximum price gives the highest production, and how much will Danish Design

A / S produce?