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In: Economics

PART C features an essay-type question with three subparts and requires to provide a full analysis...

PART C features an essay-type question with three subparts and requires to provide a full analysis of the social cost of the output decision of a profit maximizing monopoly firm, assuming that the firm is the only producer in a market.
Thoroughly discuss:

2. Assuming that the government forces the monopoly firm to lower its price, show how the output of the firm would increase;

Solutions

Expert Solution

Inorder to help you understand the concept in a better way, I have given an indepth analysis for the monoplist's output decision. I have taken a hypothetical example in which I have used a hypothetical demand and cost function. In addition I have made a comparative analysis of output decision under Perfect market competition scenario.  

Now let us see if government intervenes and forces the monopoly firm to lower its price:

Dear Student/ Learner, it was my great pleasure to help you solving this problem. I wish you best luck for your learning endeavour.
Happy Learning

Rahul Sunny answered 7 months ago
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