Refer to the Diagram for a Pure Monopolist

question 4

Multiple Choice

Refer to the diagram for a pure monopolist. If a regulatory commission sets the price to achieve the socially optimal allocation of resources, it will have to

• A)tax the monopolist P₃ P₁ per unit to prevent the monopolist from realizing an economic profit.
• B)subsidize the monopolist or the monopolist will go bankrupt in the long run.
• C)subsidize the monopolist P₁ P₄ per unit to allow the monopolist to break even.
• D)tax the monopolist P₁ P₂ per unit to prevent the monopolist from realizing an economic profit.

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