If a monopolist's profits were taxed away and redistributed to its consumers,

Question

Quizplus · Accepted Answer

Taxing a monopolist's profits and redistributing them to consumers does not address the primary source of inefficiency in a monopoly, which is the reduced output compared to what would be produced in a competitive market. The monopolist still has no incentive to increase output to the competitive level, so inefficiency remains due to lower output.

If a Monopolist's Profits Were Taxed Away and Redistributed to Its