The graph below shows demand curve and cost data for a firm operating as a monopolist. In addition, the green line shows average total costs (ATC).
Suppose that the government decided to regulate this monopolist by requiring the firm to produce at the point where the Marginal Cost curve intersects with the demand curve. What is the quantity under this marginal cost pricing?
4.35
Marginal Cost curve is black and demand curve is red. Where do they intersect? What is the quantity at that point?
Suppose that the government decided to regulate this monopolist by requiring the firm to produce at the point where the Marginal Cost curve intersects with the demand curve. What is the price under this marginal cost pricing?
7.83
Recall that the MC curve is black and the demand curve is red. Where do they intersect? What is the price at that point?
Compared to the profit maximizing quantity for this monopolist, the marginal cost pricing quantity is
Bigger
Recall that the profit maxinimzing quantity is where MC = MR. Find that point and compare the quantity at that point to the quantity where MC = Demand Curve.
Compared to the profit maximizing price for this monopolist, the marginal cost pricing price is
Smaller
First find the profit maximizing qunatity for the monoplist (MC = MR). Then find the price the monopolist will be able to charge for this amount. Compare that price to the price where MC = Demand Curve.