A lump-sum profit tax imposed on a monopolist will cause the monopolist to increase the price and reduce output in order to maximize its profits.

Name: A lump-sum profit tax imposed on a monopolist will cause the monopolist to increase the price and reduce output in order to maximize its profits.
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Question

Quizplus · Accepted Answer

A lump-sum profit tax is a fixed amount and does not depend on the quantity produced or sold, so it does not affect the marginal cost or the monopolist's decision on price or output level to maximize profits.

A Lump-Sum Profit Tax Imposed on a Monopolist Will Cause