Directions: Based on what you've learned about Monopolies and why/how we regulate them, consider the question below. This question will be graded out of 10 points.

The graph below shows the demand and cost curves of a firm that does not price discriminate.

(a) Suppose the firm produces at the profit-maximizing output. Using the labeling on the graph, identify each of the following.

(i) Level of output. Explain.

Q2 because this is where MR=MC

(ii) Price

P5

(b) Suppose the firm produces at the revenue-maximizing output. Using the labeling on the graph, identify each of the following.

(i) Level of output. Explain.

Q3 . This is where MR becomes negative . At output levels below Q3 , the firm can always increase TR by producing another unit of output

(ii) Price

P3

(c) Suppose the government regulates the firm's price to produce the allocatively efficient level of output. Using the labeling on the graph, identify each of the following.

(i) The price the government would require the firm to set

(ii) The allocatively efficient level of output

(d) Suppose the firm produces at the allocatively efficient level of output.

(i) Would it be earning a profit or incurring a loss? Explain.

(ii) Using the labeling on the graph, identify the area of the profit or loss at the allocatively efficient level of output.

(e) Using the labeling on the graph, identify the consumer surplus at the allocatively efficient level of output.

(f) Suppose the regulators establish a price that allows the firm to just cover all its opportunity costs. Using the labeling on the graph, identify the price the regulators would set to achieve this objective.