Illustrate in the graph below the deadweight loss (DWL) that would result if this monopolist were allowed to operate as a profit maximizing firm without regulation. If regulated, the monopolist has to behave like a competitive firm.
I already drew the demand curve and labelled it D.
- Draw the marginal cost curve and label it as MC.
- Locate the price and quantity the monopolist will set WITHOUT regulation and label it as Pm and Qm.
- Locate the price and quantity the monopolist will set UNDER regulation and label it as Pc and Qc.
Shade the area that represents DWL.