Suppose we have a monopoly company. Politicians instruct the competition authority to

examine the company and its market.

a) Show graphically and discuss how the competition authority can regulate the price that

the company may demand in this market so that we maximize it

socio-economic efficiency.

b) It can be politically enticing to force the company to ask for a "too" low price.

Show graphically and discuss what welfare consequences this can have.

c) Discuss and show graphically under what circumstances a regulated ("low") price

can cause the monopolist to cease production altogether. Can these

circumstances show that it may be justified to allow monopolies and

monopoly pricing?