When a per unit tax is imposed on the sale of a product of a monopolist, the resulting price increase will:
A)not always be less than the tax.
B)always be more than the tax.
C)always be less than if a similar tax were imposed on firms in a competitive model.
D)always be less than the tax.

Question

Quizplus · Accepted Answer

In a monopoly, the monopolist may not pass the entire tax onto consumers, so the price increase can be less than the tax. The monopolist balances between absorbing some of the tax and passing it on to maintain profit maximization.

When a Per Unit Tax Is Imposed on the Sale