A natural monopolist with total cost function C= 1000+20Q, where Q is the quantity produced, operates in a market by the demand function Q= 100 – P, where Q is the Quantity demanded and P is the price.
1. If the monopolist is the subjects to marginal cost regulation, what is profit and the consumer surplus?
2. If the monopolist is subjects to average pricing regulation, how much it would produce and what is the prices it would charge? What is the consumer surplus?
3. If each dollar of taxes costs the economy $1.2, which is above two types of regulation would be preferred?