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Welcome to the Q&A for ECN/APEC 2010, where you can ask questions and receive answers from your fellow students, the TA, and your professor.

Please only ask questions about the material for the course. Try to create discussions about the material we see in class, instead of just thinking of economics in general (this is an introduction to microeconomics class, not a policy or government class).

For questions and discussions about course organization or other course related topics, come see us after class or during office hours.

Feel free to discuss quiz questions on the Q&A, but do not provide direct answers to quiz questions before the quiz's due date.

Practice Quiz 13 question 11.

+1 vote
26 views
Suppose that this monopolist has no fixed costs.

Calculate the increase in consumer surplus from an unregulated monopoly to a regulated monopoly in which the government imposes the price that maximizes consumer surplus while keeping the monopolist in business.

i got this question wrong, how do i calculate this?
asked May 1 by canvas-e415876b4fe9a (251 points)

1 Answer

+1 vote
By looking at the graph you have to first find the consumer surplus at the unregulated monopoly. So you find where marginal revenue and marginal cost are equal and then you draw a line up to the demand curve (this will be your price). Once you know where your price is at then you find the area of the triangle and this will be your consumer surplus on an unregulated monopoly.

Now you have to find your consumer surplus in a regulated monopoly. You will find your price where the average cost touches the demand curve.Then you find the area of that triangle, this equals your consumer surplus.

Last you minus your consumer surplus in a regulated monopoly by your consumer surplus in an unregulated monopoly.
answered May 1 by canvas-daf8945daf79f (171 points)
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