Question

Use the graph to the right for a monopoly to answer the questions. What quantity will the monopoly produce, and what price will t monopoly charge? The monopoly will produce □ units and charge st per unit. (Enter numeric responses using real numbers rounded to two decimal places.) Suppose the monopoly is regulated. If the regulatory agency wants to ac hieve economic efficiency, what price should it require the monopoly to charge? How much output will the monopoly produce at this price? The regulatory agency should regulate a price of S At that price, the monopoly will produceunits. Will the monopoly make a profit if it charges this price? At the regulated price, the monopoly will make profit of S Show transcribed image text

Answer 1

The monopoly produces 48 units and charge $6.8 Reason At profit - maximizing level of output, MC = MR and thus 48 units are produced and the corresponding price in the demand curve is $ 6.8 The agency regulates a price of $ 6.4 and the monopoly produces 56 units Reason This is where MC connects demand curve. Profit is $ (6.4 - 5.2) times 56 = $67.2