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Output Price Total Cost 0 $500 $250 1 300 260 2 250 290 3 200 350 4 150 500 5 100 680 If the pure monopoly were forced to produce the allocatively efficient level of output through the imposition of a price ceiling, the price would have to be set at _____.

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Answer:

If the pure monopoly were forced to produce the allocatively efficient level of output through the imposition of a price ceiling, the price would have to be set at _____.

$200.

Explanation:

a) Data and Calculations:

Output    Price     Total Cost   Marginal    Total      Marginal  

                                                  Cost     Revenue   Revenue  

0             $500         $250       $250         $0             $0

1                300           260             10       300           300

2               250           290            30       500           200

3               200           350            60       600           100

4                150           500          150       600               0

5                100          680           180       500          -100

b) The pure monopolist sets a price that is higher than the marginal cost and because of price control (ceiling) the price will not be set above $200.

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