Would a lump sum subsidy achieve the governments goal

Reference no: EM13235608

Assume that a profit maximizing monopolist faces an inverse demand function given by p(), and a total cost given by c(y). Suppose the government wishes to combat the undesirable allocational effects of a monopoly through the use of a subsidy.

Would a lump sum subsidy achieve the government's goal? Why or why not?
What about a per unit subsidy?

Reference no: EM13235608

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