![FIGURE 13.7](cowentabarrokecon3e_ch13_fig_7.jpg)
A Price Control on a Monopoly Can Increase Output Without regulation, the monopoly maximizes profit by choosing Pm, Qm. If the government imposes a price control at PR, the monopolist chooses QR, a larger quantity. The optimal price is at P = MC, but at this price the monopolist is making a loss and will exit the industry. The lowest price that will keep the monopolist in the industry is P = AC at point a. At that price, the monopolist makes a zero (normal) profit.