If the government imposes a price ceiling below the monopolist's average cost curve, then in the long run the regulation makes:
A) consumers better off.
B) consumers worse off.
C) the monopolist better off.
D) None of the statements is correct.

Question

Quizplus · Accepted Answer

If the government imposes a price ceiling below the monopolist's average cost curve, the monopolist will be forced to continue producing at a loss in the long run. As a result, the monopolist will reduce output and eventually exit the market, leading to a reduction in supply and an increase in price. Consumers will be worse off as they will face higher prices and reduced availability of the product. Therefore, option B is the correct choice.

If the Government Imposes a Price Ceiling Below the Monopolist's