|Posted on April 17, 2014 at 9:35 AM|
If a monopoly was regulated to produce at the socially optimal level of output, it would produce where the price (AKA demand) intersects the marginal cost curve (P=MC).
At this level of output, allocative efficiency is achieved and there is no deadweight loss. This point will maximize the sum of consumer and producer surplus.
See the No Bull Review diagram below to see the precise location of the socially optimal level of output.
AP Microeconomics Unit 2 Product Markets