Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 11

The accompanying diagram depicts a monopolist whose price is regulated at $10 per unit. Use this figure to answer the questions that follow.

a. What price will an unregulated monopoly charge?
b. What quantity will an unregulated monopoly produce?
c. How many units will a monopoly produce when the regulated price is $ 10 per unit?
d. Determine the quantity demanded and the amount produced at the regulated price of $10 per unit. Is there a shortage or a surplus?
e. Determine the deadweight loss to society (if any) when the regulated price is $10 per unit.
f. Determine the regulated price that maximizes social welfare. Is there a shortage or a surplus at this price?