Consider the setting of Problem 5. a. Suppose the government puts a $2 per cubic yard tax
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a. Suppose the government puts a $2 per cubic yard tax on the monopolist's product, paid by the monopolist. What happens to the price consumers pay? What share of the tax is this?
b. What price subsidy would get the monopolist to sell the same quantity as if it were a price-taking firm (the quantity that maximizes aggregate surplus in the market)?
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a The monopolist will now charge 4533 and consumers will pay 17 percent of the tax b A 6 per unit su...View the full answer
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