Question consider a monopoly with a horizontal marginal, Ask an Expert

Economics

Question: Consider a monopoly with a horizontal marginal cost schedule. If a tax t is imposed on the monopolist, show that:

(a) Price increases by exactly half the tax if the monopolist faces a linear demand curve p = a - bQ.

(b) Price increases by a multiple [1/(1 -/eta^d)] if the monopolist faces a demand schedule with constant elasticity eta^d. In both cases, provide also a graphical representation.

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M93121165

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