A monopolist has an inverse demand curve given by p(y) = 12 − y and a cost curve given by c(y) = y2.
(a) What will be its profit-maximizing level of output? _____.
(b) Suppose the government decides to put a tax on this monopolist so that for each unit it sells it has to pay the government _____. What will be its output under this form of taxation? _____.
(c) Suppose now that the government puts a lump sum tax of $10 on the profits of the monopolist. What will be its output? _____.