Suppose a monopoly is producing its profit-maximizing output level.Now suppose the government imposes a lump-sum tax on the monopoly, independent of its output.As a result the monopoly's profit will fall.

Question

Quizplus · Accepted Answer

A lump-sum tax increases the fixed costs for the monopoly, reducing its overall profit, but it does not affect the marginal cost or output level.

Suppose a Monopoly Is Producing Its Profit-Maximizing Output Level