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Monopoly profit maximization and taxes The inverse demand curve is p = 120 - Q and the marginal cost is constant at 10. a. Assume
Monopoly profit maximization and taxes
The inverse demand curve is p = 120 - Q and the marginal cost is constant at 10.
a. Assume that this is a monopolistic market. What is the deadweight loss in this market as compared to an identical market with perfect competition?
b. Who bears the welfare losses from a monopoly in this case?
c. How does charging the monopoly a per-unit tax of t = 10 per unit affect the monopoly optimum and the welfare of consumers, the monopoly, and society (where society's welfare includes the tax revenue)?
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