Question

what is the ceiling price(maximum price) which the govt can set for a monopolist so that deadweight loss is minimised?

Answer 1

hi i have just read the topic and according to me there is no specific value for which the govt can set ceiling price so as to minimize the deadweight losses since setting the price at which demand (or price) curve meets the marginal cost curve but thenif the fixed cost is too high and marginal cost more or less constant and less compared to fixed costs then the average cost curve is always above the marginal cost so that there is a net loss to the producer which can be compensated by giving subsidy but then that would again be paid by tax payer's money which again creates a deadweight loss...so every case is different and every solution should be unique...plz tell if i am wrong