Possible schemes for taxing a monopoly

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Reference no: EM13801653

Consider the following possible schemes for taxing a monopoly:

(i) A proportional tax on profits

(ii) A tax on each unit produced

(iii) A proportional tax on the gap between price and marginal cost

(a) Explain how each of these taxes would affect the monopolist's profit-maximizing output choice. Would the tax increase or decrease the deadweight loss from monopoly?

(b) Graph your results for each of these taxes.

Reference no: EM13801653

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