Suppose the government imposes a profit tax on a monopoly so that the after-tax profit becomes , where p is the before tax profit. After the imposition of the tax :
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JNU SIS 2020 Question 29: Monopoly and price discrimination
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Suppose the government imposes a profit tax on a monopoly so that the after-tax profit becomes (1 - α)π, where p is the before tax profit. After the imposition of the tax: (A) The quantity sold remains the same (B) The quantity sold decreases (C) The price increases (D) None of the above happens
Also written as: Suppose the government imposes a profit tax on a monopoly so that the after-tax profit becomes (1 - alpha)pi, where p is the before tax profit. After the imposition of the tax:
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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