Consider the following statements 1. One way for the government to induce a monopolist to expand his output is by imposing a price ceiling that makes the monopolist lower his price. 2. MC = MR = AC = AR shows the equilibrium position of the competitive firm. 3. One way for the government to induce a monopolist is to make the monopolist raise his price. 4. One way for the government to induce a monopolist is to expand his output by imposing a specific tax on the monopolist output.

The correct answer is: Only 2.

Statement 1 is incorrect because a price ceiling will not induce a monopolist to expand his output. A price ceiling is a legal maximum price that can be charged for a good or service. If the government imposes a price ceiling below the monopolist’s equilibrium price, the monopolist will be unable to sell any output.

Statement 2 is correct. A competitive firm will produce at the point where MC = MR = AC = AR. This is because the competitive firm is a price taker, meaning that it cannot affect the market price. The competitive firm will therefore produce at the point where marginal revenue equals marginal cost, which is also the point where average cost equals average revenue.

Statement 3 is incorrect. The government cannot induce a monopolist to raise his price. A monopolist is a price maker, meaning that it can affect the market price. The monopolist will therefore choose the price that maximizes its profits, which is not necessarily the highest price that it could charge.

Statement 4 is incorrect. The government cannot induce a monopolist to expand his output by imposing a specific tax on the monopolist’s output. A specific tax is a tax that is levied on a per-unit basis. If the government imposes a specific tax on the monopolist’s output, the monopolist will shift the burden of the tax onto consumers by raising the price of its output. The monopolist will therefore produce less output, not more.