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Lesson 3.08Regulating Monopolies1.Assume that electricity production has been done by several regional firms in the U.S. each operating as a pure monopoly.a.Explain and graphically illustrate how the electrical monopolist would determine its profit maximizing price and output level. (Label Pm and Qm)b.Identify any area of consumer and/or producer surplus for the profit maximizing monopoly.c.Identify the deadweight loss for the monopolist.2.Now assume the federal government imposes a regulation on the monopoly. Draw a new monopoly graph for part 2.
a.Show and explain how the regulated electrical monopolist would determine its profit-maximizing price and output level. (Label Pr and Qr).