Figure 42.1
-In Figure 42.1, what is the quantity an unregulated monopolist will produce (assuming the regulator strives for zero economic profit)?

Question

Quizplus · Accepted Answer

The unregulated monopolist will produce at quantity Q₁, where MC=MR. However, the regulated monopolist will produce at quantity Q₂, where the price is equal to marginal cost plus a markup to allow for a normal rate of return on investment. Therefore, the regulated monopolist will produce more than the unregulated monopolist to achieve zero economic profit.

Figure 42.1 -In Figure 42.1, What Is the Quantity an Unregulated Monopolist