Posted by ZIO on .
Q1) whether the following statement is true or not? some reasons plz~!
"a monopolist produced 1 million units last year. If a $10 per unit tax is imposed, the profits of the monopolist will decrease by $10 million"
Chances are the monopolist would raise the price of the product by $10 a unit and the profits would remain the same.
False: profits will decrease, but by an amount less than $10M. The monopolist will cut back on production; it will produce something less than 1 million units.