If the federal government enacts a tax on a monopoly, how would you expect the additional tax to affect the following:

a. Profits of the monopoly
b. Output produced by the monopoly
c. Prices charged by the monopoly

If the federal government enacts a tax on a monopoly, the additional tax would likely have the following effects:

a. Profits of the monopoly: The tax would reduce the profits of the monopoly. Monopolies have the ability to control prices, which allows them to earn higher profits. However, when a tax is imposed, it increases the costs for the monopoly. As a result, the monopoly's profits would decrease because it would have to allocate a portion of its revenue to pay the tax.

b. Output produced by the monopoly: The tax may have an impact on the output produced by the monopoly. To understand this, we need to consider the elasticity of demand for the monopoly's product. If the demand for the monopoly's product is relatively elastic (meaning the quantity demanded is highly responsive to changes in price), then the tax would likely result in a decrease in the quantity produced by the monopoly. This is because as the monopoly's costs increase due to the tax, it may find it less profitable to produce the same quantity as before. However, if the demand for the monopoly's product is relatively inelastic (meaning the quantity demanded is less responsive to changes in price), the tax may not have a significant impact on the quantity produced.

c. Prices charged by the monopoly: The tax could potentially lead to an increase in prices charged by the monopoly. As mentioned earlier, the tax increases the monopoly's costs. To maintain its profit levels or compensate for the reduction in profits caused by the tax, the monopoly may pass on some or all of the tax cost to consumers by raising the prices of its products. However, the extent to which the monopoly can raise its prices depends on the elasticity of demand for its product. If the demand is relatively elastic, raising prices may result in a significant decrease in quantity demanded, which could offset the increased revenue from higher prices. In such cases, the monopoly may be limited in its ability to pass on the tax burden to consumers through higher prices. On the other hand, if the demand is relatively inelastic, the monopoly may have more flexibility to increase prices.

It is important to note that the exact magnitude and impact of the tax on the monopoly would depend on various factors, such as the specific characteristics of the monopoly, the elasticity of demand, and the overall market conditions.