If the government regulates a monopoly's price below the socially efficient level,then:
A) deadweight loss increases and there is a surplus output.
B) deadweight loss decreases and there is a shortage of output.
C) deadweight loss increases and there is a shortage of output.
D) deadweight loss decreases and there is a surplus of output.

Question

Quizplus · Accepted Answer

When the government regulates a monopoly's price below the socially efficient level, it creates a situation of price ceiling, causing a shortage of output. As a result, the demand for the product exceeds the supply, leading to an increase in deadweight loss. Hence, the correct choice is C.

If the Government Regulates a Monopoly's Price Below the Socially