If a government policy change harms a monopolist, the government could

Question

Quizplus · Accepted Answer

A tax on those who gain additional benefits from the policy change can be used to compensate the monopolist and make the change a Pareto improvement. This allows for the government to maintain efficiency while also addressing the harm caused to the monopolist. Option B is not the best choice because increasing the general tax rate may harm other individuals and cause inefficiencies. Option C is not applicable because a policy change that harms a monopolist cannot be a Pareto improvement by definition. Option D is not correct because there are ways to mitigate the harm to a monopolist as explained in option A.

If a Government Policy Change Harms a Monopolist, the Government