Author Question: If a monopolist's profits were taxed away and redistributed to its consumers, A) inefficiency ... (Read 130 times)

tfester · **on:** Jul 1, 2018

If a monopolist's profits were taxed away and redistributed to its consumers,

A) inefficiency would remain because output would be lower than under competitive conditions.
B) inefficiency would remain, but not because output would be lower than under competitive conditions.
C) efficiency would be obtained because output would be increased to the competitive level.
D) efficiency would be obtained because output would be increased and profits removed.

Question 2

Suppose the market demand curve is perfectly elastic in an increasing-cost industry. If an output tax of t per unit is imposed on all producers of the good, what happens to the market equilibrium outcome?

A) The price paid by buyers increases and output declines
B) The price paid by buyers does not change and output decrease
C) The price paid by buyers and output increase
D) The price paid by buyers and output decrease