If the inverse demand function is p = 120 Q and the marginal cost is constant

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If the inverse demand function is p = 120 – Q and the marginal cost is constant at 10, how does charging the monopoly a specific tax of t = 10 per unit affect price and quantity and the welfare of consumers, the monopoly, and society (where society’s welfare includes the tax revenue)? What is the incidence of the tax on consumers?

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Managerial Economics and Strategy

ISBN: 978-0321566447

1st edition

Authors: Jeffrey M. Perloff, James A. Brander

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