Problem 14 A monopolist has an inversedemand curve given by p(y) = 12-y and a costcurve given by c(y) = y. (b) What is thedeadweight loss of monopoly? (c) Suppose thegovernment decides to put a tax on thismonopolist so that for each unit it sells it has topay the government $2. What will be its outputunder this form of taxation? (d) What will be theextra deadweight loss due to the tax? (e)Suppose now that the government puts a lumpsum tax of $10 on the profits of the monopolist.What will be its output?

Demand function of a Monopoly : p = 12 - y Cost function : c = y

Problem 14 A monopolist has an inverse demand curve given by p(y) = 12-y and a cost curve given by c(y) = y. (b) What is the deadweight loss of monopoly? (c) Suppose the government decides to put a tax on this monopolist so that for each unit it sells it has to

Problem 14 A monopolist has an inverse demand curve given by p(y) = 12-y and a cost curve given by c(y) = y. (b) What is the deadweight loss of monopoly? (c) Suppose the government decides to put a tax on this monopolist so that for each unit it sells it has to

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Chapter1: Making Economics Decisions

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Question

Problem 14 A monopolist has an inverse
demand curve given by p(y) = 12-y and a cost
curve given by c(y) = y. (b) What is the
deadweight loss of monopoly? (c) Suppose the
government decides to put a tax on this
monopolist so that for each unit it sells it has to
pay the government $2. What will be its output
under this form of taxation? (d) What will be the
extra deadweight loss due to the tax? (e)
Suppose now that the government puts a lump
sum tax of $10 on the profits of the monopolist.
What will be its output?

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