Question
A monopoly is facing a demand curve given by Q=ap - , >1. The monopoly's unit production cost is c>0. Suppose now that the government
A monopoly is facing a demand curve given by Q=ap-, >1. The monopoly's unit production cost is c>0. Suppose now that the government imposes a tax of t dollars per unit on each unit of output sold to consumers.
- What is the increase in price caused by the tax?
- What is the relationship between demand elasticity and the price increase?
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Macroeconomics
Authors: Andrew B. Abel, Ben S. Bernanke, Dean Croushore, Ronald D. Kneebone
6th Canadian Edition
321675606, 978-0321675606
