Imposition of per unit tax on monopoly

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Reference no: EM1316574

a) Show that, with a linear demand curve, the imposition of a per-unit tax on a monopoly will cause price to rise by less than the tax. Would this be true for a constant elasticity demand curve?

Suppose that the monopolist faces a linear demand curve

b) Consider the following possible schemes for taxing a monopoly:

i) A proportional tax on profits.
ii) A proportional tax on the gap between price and marginal cost.
iii) A tax on each unit produced.

Reference no: EM1316574

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