3a) MONOPOLY REGULATION. Suppose that you had a monopoly on water which has a MC=$1 per litre and an initial fixed cost of $50 to set up. Explain using the graph below, how you would choose to set price and output, and what the approximate price and quantity would be. $12 $10 $8 $6 $4 $2 demand $0 0 50 100 150 200 250 300 350 litres 70 b) Illustrate the Consumer Surplus, Producer Surplus, AND Deadweight loss of the monopoly market and explain whether the market is efficient. c) Explain and illustrate the price, quantity and marginal value if the government chooses to regulate the monopoly by setting a socially optimal price. Explain whether this is efficient.

Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter14: Monopoly
Section: Chapter Questions
Problem 5CQQ
icon
Related questions
Question
3a) MONOPOLY REGULATION.
Suppose that you had a monopoly on water which has a
MC=$1 per litre and an initial fixed cost of $50 to set up. Explain using the graph below, how
you would choose to set price and output, and what the approximate price and quantity would
be.
$12
$10
$8
$6
$4
$2
demand
$0
0 50
100 150 200 250 300 350 litres
70
b)
Illustrate the Consumer Surplus, Producer Surplus, AND Deadweight loss of the
monopoly market and explain whether the market is efficient.
c)
Explain and illustrate the price, quantity and marginal value if the government chooses to
regulate the monopoly by setting a socially optimal price. Explain whether this is efficient.
Transcribed Image Text:3a) MONOPOLY REGULATION. Suppose that you had a monopoly on water which has a MC=$1 per litre and an initial fixed cost of $50 to set up. Explain using the graph below, how you would choose to set price and output, and what the approximate price and quantity would be. $12 $10 $8 $6 $4 $2 demand $0 0 50 100 150 200 250 300 350 litres 70 b) Illustrate the Consumer Surplus, Producer Surplus, AND Deadweight loss of the monopoly market and explain whether the market is efficient. c) Explain and illustrate the price, quantity and marginal value if the government chooses to regulate the monopoly by setting a socially optimal price. Explain whether this is efficient.
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Microeconomics
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Microeconomics (MindTap Course List)
Principles of Microeconomics (MindTap Course List)
Economics
ISBN:
9781305971493
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics 2e
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
Principles of Economics, 7th Edition (MindTap Cou…
Principles of Economics, 7th Edition (MindTap Cou…
Economics
ISBN:
9781285165875
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning