Question

Use the graph to the right for a monopoly to answer the questions 4.8 What quantity will the monopoly produce, and what price will the monopoly charge? MC 4.0 3.6 5 3.2 a 2.8 2.4 o 2.0 The monopoly will produce units and charge $L per unit. (Enter numeric responses using real numbers rounded to two decimal places.) ATC Suppose the government decides to regulate this monopoly and imposes a price ceiling of $2.40 (in other words, the monopoly can charge less than $2.40 but can't charge more). Now what quantity will the monopoly produce, and what price will the monopoly charge? The monopoly will produce units and charge s per u nit. Will every consumer who is willing to pay this price be able to buy the product? Explain briefly 1.2 0.8 0.4 MR With the price ceiling, O A. there will be a shortage because consumers will demand more O B. there will be a shortage because consumers will demand less than 0 16 32 4860 72 84 96 108 120 132 144 156 Quantity than the monopoly will supply the monopoly will supply C. there will be a surplus because consumers will demand less than O D. there will be a surplus because consumers will demand more than O E. the quantity supplied by the monopoly will equal the quantity the monopoly will supply the monopoly will supply demanded by consumers

Answer 1

4.8 4.4 4.0 3.6 5 3.2 a 2.8 8 2.4 D 2.0 МС ATC 1.2 0.8 0.4 MR 0 16 32 4860 72 84 96 108 120 132 144 156 Quantity

Setting MC=MR,the monopolist will produce 84 units and charge 3.20 per unit

When the government imposes a price ceiling of 2.40, then MC=MR(as this becomes new MR)

Quantity produced by a monopoly would be 90 and price = 2.40

No,as the price ceiling will cause a shortage as at this price, Demand = 132 whereas the monopoly is producing 90 units only.

option(A)