An economic problem with using subsidies or price ceilings to move a monopoly toward the competitive equilibrium is that
A) it may increase monopoly profits.
B) it may decrease monopoly profits.
C) policy makers may not be able to determine what the competitive equilibrium is.
D) policy makers always need to be lobbied before taking any actions.

Question

Quizplus · Accepted Answer

Subsidies or price ceilings might not effectively move a monopoly towards competitive equilibrium because policy makers may struggle to accurately determine what the competitive equilibrium price or quantity should be. This difficulty arises from the complexity of markets and the challenge of predicting the outcomes of interventions without causing unintended consequences.

An Economic Problem with Using Subsidies or Price Ceilings to Move