Regulation under monopoly-optimal price-quantity pair

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Reference no: EM13869073

Regulation under a monopoly

The inverse demand for a product is P(Q) = 100 − (1/2)Q. Production is associated with a marginal private cost, MC_P(Q) = Q, and a constant marginal external cost, MC_E = 25.

(a) Graph inverse demand, marginal revenue, marginal private cost, and marginal social cost on a single graph. Label the axes.

(b) What is the unregulated equilibrium? (Define in terms of price and quantity.)

(d) What is the deadweight loss under an unregulated monopoly in this case?

(e) What should the regulator do?

Reference no: EM13869073

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