Consider the monopoly in the figure below with price regulated at $20 per unit. The regulated price will result in a:
A) surplus of 3 units.
B) shortage of 3 units.
C) surplus of 18 units.
D) shortage of 18 units.

Question

Consider the monopoly in the figure below with price regulated at $20 per unit. The regulated price will result in a: 
A) surplus of 3 units. 
B) shortage of 3 units. 
C) surplus of 18 units. 
D) shortage of 18 units.

Quizplus · Accepted Answer

At the regulated price of $20, the quantity demanded is 28 units, while the quantity supplied by the monopoly is only 10 units. Therefore, there is a shortage of 18 units (28-10=18).

Consider the Monopoly in the Figure Below with Price Regulated