Now assume the federal government imposes a regulation on the monopoly. Draw a new monopoly graph for part 2.
Show and explain how the regulated electrical monopolist would determine its profit-maximizing price and output level. (Label Pr and Qr)
Identify any area of consumer surplus and/or producer surplus for the profit maximizing monopoly.
Now the federal government decides to deregulate the market for electricity nationwide. Draw a new monopoly graph for part 3.
Show and explain how deregulation will impact price and output in the now perfectly competitive market for electricity production. (Hint: You should use a monopoly graph to show where the perfectly competitor would set price and quantity.) (Label Ppc and Qpc)
Identify any area of consumer surplus and/or producer surplus for the de-regulated monopoly.