Question 3 - 20 Marks (Study Textbook page 298)

The table in picture below shows costs and demand data for a monopoly.

(a)If the monopoly is unregulated by the government:

i.)what price will they charge? Explain why?2 Mark

ii.)what output will they produce?2 Marks

iii.)How much profit will they make?2 Marks

(b)If the monopoly is regulated by the government and is only allowed to sell their product at a price equal to their marginal cost, (Socially Optimal price) using the data in the table:

i.)what price can they charge? Explain why?2 Marks

ii.)what output will they produce?2 Marks

iii.) How much profit will they make?2 Marks

(c)If the monopoly is regulated to charge their average unit cost, (Fair-return price) using the data in the table:

i.)what price will they charge? Explain why?2 Marks

ii.)what output will they produce?2 Marks

iii.)How much profit will they make?2 Marks

When it comes to a monopoly, why do we need the government to help. 2 Marks