Class, we know that a monopoly is not economically efficient because it does not yield productive efficiency P=ATC or allocative efficiency P=MC. Instead P>MC and exceeds ATC at its minimum resulting in an under-allocation of resources. Government tries to correct for this under-allocation by establishing a legal (ceiling) price where P=MC.

Do price regulations produce the desired result of efficiency? Provide an example

Answer rating: 100% (QA)

Answer Price regulations such as legal price ceilings are attempts by the government to correct mark... View the full answer