With the table set price is equal to Marginal cost use an unregulated monopolist.
In the table below are cost and demand data for a pure monopolist.
|
Quantity
Demanded
|
Price
|
Marginal
Revenue
|
Average
Cost
|
Marginal
Cost
|
|
0
|
$105)00
|
|
|
|
|
1
|
96)00
|
$ 96)00
|
$144)00
|
$144)00
|
|
2
|
87)00
|
78)00
|
90.00
|
36)00
|
|
3
|
78)00
|
60.00
|
70.34
|
30.00
|
|
4
|
69)00
|
42)00
|
63)00
|
42)00
|
|
5
|
60.00
|
24)00
|
60.00
|
48)00
|
|
6
|
51)00
|
6)00
|
58)50
|
51)00
|
|
7
|
42)00
|
-12)00
|
57)86
|
54)00
|
|
8
|
33)00
|
-30.00
|
57)50
|
55)50
|
|
9
|
24)00
|
-48)00
|
57)33
|
56)00
|
(a) Illustrate what is the level of price, output, and amount of profit for an unregulated monopolist?
(b) Using the data in the table, illustrate what are the price, output, and profit for a regulated monopolist which sets price equal to marginal cost compared with an unregulated monopolist?
(c) Using the data in the table, illustrate what are the price, output, and profit for a regulated monopolist which charges a "fair-return" price compared with an unregulated monopolist?
(d) Analyze the effect of regulation on the allocation of resources. Which situation is most efficient? Which situation is most likely to be chosen by government? Why?