Would the outcome of a Hotelling model with prices regulated by the government be efficient?
A. Yes, it will be efficient. Such regulation will induce the firms to locate in the social optimal location.
B. No it will not be efficient. Price regulation does not affect efficiency in this setting.
C. Yes, it will be efficient. Regulation can lower the price until consumer surplus is maximized.
D. No, it will not be efficient. Firms will use maximum differentiation, which is inefficient.