?

AP® Microeconomics

Free Version

Upgrade subject to access all content

Difficult

Monopoly: Heart Medication

APMICR-JL0NYF

A monopoly is producing a patented heart medication, and there are no externalities created by production or consumption in the market. As a condition of extending the firm's patent, the government imposes a binding (effective) price ceiling for the medication at marginal cost.

What would be the effect of this price ceiling on consumer surplus and deadweight loss?

A

Consumer surplus and deadweight loss would both increase.

B

Consumer surplus and deadweight loss would both decrease.

C

Consumer surplus would increase while the effect on deadweight loss cannot be determined.

D

Consumer surplus would decrease while deadweight loss would increase.

E

Consumer surplus would increase while deadweight loss would decrease.