this may seem like a very simple conceptual question but I have been drawing graphs and googling for quite a while and I think I'm just confusing myself. If we haven't set a price yet for the price ceiling, we're just thinking through conceptually.

Initially, I was thinking that that placing a price cap would increase total surplus because it would increase consumer surplus and reduce deadweight loss. However, upon further reflection, if the ceiling is placed too low, the total surplus could equal or be even more than the original monopoly?

Am I overthinking it? What's going on here.

Thanks in advance everyone!

  • 3
    $\begingroup$ Have you tried drawing the graphs yourself and seeing what they look like? $\endgroup$ – user18 May 3 '20 at 5:24

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