If the government regulates the price a monopoly can charge,and the price ceiling is set below what the competitive market price would be,then
A) a shortage will exist.
B) a surplus will exist.
C) producer surplus is maximized.
D) consumer surplus is maximized.

Question

Quizplus · Accepted Answer

If the price ceiling is set below what the competitive market price would be, the monopoly would have to sell its output at a lower price. As a result, the quantity demanded of the product would increase, and the quantity supplied by the monopoly would decrease, leading to a shortage. Therefore, choice A is the best answer.

If the Government Regulates the Price a Monopoly Can Charge,and