A profit-maximizing monopoly faces an inverse demand function described by the equation p(y) = 60 - y and its total costs are c(y) = 10y, where prices and costs are measured in dollars. In the past it was not taxed, but now it must pay a tax of 4 dollars per unit of output. After the tax, the monopoly will

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The tax increases the marginal cost by 4 dollars, but the monopoly will increase the price by less than the full amount of the tax due to the downward-sloping demand curve. The price increase is typically less than the tax amount, often around half, due to the elasticity of demand.

A Profit-Maximizing Monopoly Faces an Inverse Demand Function Described by the Equation