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Draw a graph for a monopoly earning a positive economic profit. Suppose the government institutes a per unit tax on the good produced by the
Draw a graph for a monopoly earning a positive economic profit. Suppose the government institutes a per unit tax on the good produced by the monopoly (consider the impact it will have on the cost curves). On the graph, show how this will affect the monopoly's profit maximizing level of output and the price charged by the monopoly. What happens to the area of deadweight loss? Based on what you've previously learned about deadweight loss, why was this impact expected?
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