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11 April, 18:01

Which of the following statements is true?

a. If a tax is imposed on a product sold by a monopolist, the monopolist will maximize its profits by producing where marginal revenue equals marginal cost.

b. A monopolist will always charge the highest possible price.

c. If a tax is imposed on a product sold by a monopolist, the monopolist can increase its price to pass along the entire tax to consumers.

d. Because a monopolist faces no competition, the demand for its product is perfectly inelastic.

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Answers (1)
  1. 11 April, 20:15
    0
    Option C is correct

    Explanation:

    Since it is a specific sales tax, the effect would be shifted to the consumers. The optimal output would be determined by

    MR = MC + T = MCT

    MR = marginal revenue, MC = marginal cost, T = tax

    That mc curve would shift to mct which is the new equilibrium
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