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Questions › JNU › JNU SIS 2016 › Q41
2 marks, −1Microeconomics › Monopoly and price discrimination › Taxes and monopolyModerateabout 2 min

JNU SIS 2016 Question 41: Monopoly and price discrimination

Let the cost function of a monopolist be given by C(Q)=cQC(Q) = cQC(Q)=cQ, where QQQ is the output. Also let the monopolist face a linear demand function, P(Q)=A−bQP(Q) = A - bQP(Q)=A−bQ. The government imposes a quantity tax of 666 per unit of output. How much does the price rise?

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Let the cost function of a monopolist be given by C(Q) = cQ, where Q is the output. Also let the monopolist face a linear demand function, P(Q) = A - bQ. The government imposes a quantity tax of 6 per unit of output. How much does the price rise? (A) 6 (B) 3 (C) 2 (D) None of the above

Monopoly and price discrimination has come up 128 times in 7 exams since 2004.

What this question tests

This question is on Taxes and monopoly, part of Monopoly and price discrimination in Microeconomics.

How a specific tax or a profit tax passes through to the price of a monopolised good.

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Question from the JNU SIS 2016 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.